With international stock markets comprising nearly two-thirds of the world’s capitalization, a broad range of investment opportunities exist outside the borders of the U.S.¹
For investors who are looking to diversify their mutual fund portfolio with exposure to companies located outside the U.S., there exist two basic choices: A global mutual fund or an international mutual fund.²,³
By definition, international funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks.
Make a Choice
The definition may seem clear, but what may seem less clear is why an investor might select one over the other.
An investor may select a global fund in order to give her portfolio manager the latitude to move the fund’s investments between non-U.S. markets and the U.S. market. This may give the manager the flexibility to take advantage of shifting opportunities that could be present at any given moment.
By investing in a global fund, the challenge for the investor is that he may not know at any point in time his total exposure to the U.S. market, within the context of his overall portfolio.
An Inside Look
Some investors choose to manage their risk by setting the desired asset allocation for their portfolio and then identifying funds that are within those asset classes. For these investors, an international fund may make more sense, since it allows them to maintain a greater adherence to their desired domestic/international stock allocation.
Keep in mind that asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.
Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
As you consider a global or an international fund, you should also be aware of the fund’s approach to the inherent currency risks. Some funds choose to engage in strategies that may mitigate the effects of currency fluctuations, while others consider currency movements—up and down—to be an element of portfolio performance.