Key Takeaways
- An international fund is a mutual fund that invests in companies outside an investor’s home country.
- For U.S. investors, international funds can enhance diversification, balancing domestic risks.
- These funds often include developed and emerging markets, offering varied risk and return levels.
- International funds provide opportunities to tap into global economic growth and trends.
- They help investors avoid missing out on potential global market upswings.
What Is an International Fund?
An international fund is a type of mutual fund that invests in companies located outside of the investor’s home country. These funds provide diversification for investors. They balance risk and tap into global growth opportunities. They cover both developed and emerging markets, encompass various asset classes, and come with varying levels of risk and potential returns.
We’ll tell you about the benefits, the risks, and how to choose the right international fund for your portfolio.
Exploring International Equity Funds
Risks and potential returns will vary by country. Developed market countries commonly offer the least risk. Fidelity’s Diversified International Fund (FDIVX) include holdings of Hitachi from Japan and Nestle from Switzerland.
The emerging market countries may offer investors significant gains with higher risks since the economies and infrastructures of these countries are growing but volatile. Within emerging markets, investors will find many funds representing leading sub-segments such as the BRICS (Brazil, Russia, India, China, and South Africa). The Franklin FTSE China ETF (FLCH) includes the holdings of Chinese companies Alibaba and Baidu. This bloc of countries would add Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates by 2024.
International Debt and Fixed-Income Funds Explained
International funds are managed to various asset classes. Debt and equity funds are the two most common, providing a broad universe for investment. Conservative U.S. investors can invest in government debt or corporate debt offerings from various countries outside the U.S. International and global bond funds are mutual funds that invest in companies globally, including those based in emerging markets. The Hartford World Bond Fund (HWDIX) includes Treasury Bills and Government Bonds from Norway, Korea, and Australia.
Assessing the Risks of International Investing
International fund investing can offer higher returns, but usually with more risk. Some factors that can increase risk include:
- Currency volatility can affect the real returns of an investor’s portfolio
- Changing economies require consistent due diligence
- Changing International regulations and legislation
What Is the Difference Between an International Fund and a Global Fund?
International funds are distinct from global funds, which invest in companies around the world and in the country where the fund’s investors are located.
How Can International Funds Benefit an Investor’s Portfolio?
Investors who own both international and domestic securities can help level out some of the volatility in a portfolio.
Can U.S. Investors Buy Individual Stocks on Foreign Markets?
An investor’s U.S. brokerage account must give them access to foreign exchanges to buy on foreign markets.
The Bottom Line
International funds are mutual funds or ETFs that may include debt or equity assets. Investors can choose these funds that invest in countries outside their country. Investing in international funds comes with the risk of currency volatility and changing economic or political environments, especially in emerging markets.