How to Invest in International Mutual Funds
February 16, 2009 by MOYMJennifer
Filed under Investing
Investing in international mutual funds can be both risky and rewarding. Whether you lose or benefit from mutual funds investing depends on whether or not you did your homework. This is when research and intelligent decisions become important.
Investing in International Mutual Funds
International mutual funds are used for investment in non-domestic securities – i.e. securities from markets all over the world. As opposed to investing in the local market, putting your money in international mutual funds is usually riskier as this type of fund is more unstable and unpredictable given the difficulty of predicting the rise and fall of foreign markets and the constant-changing value of specific currencies.
On the other hand, investing in international mutual funds also come with rewards. The higher potential risks also come with higher potential profits. When the foreign markets are ‘on your side’, so to speak, you get a larger than usual profit margins. Furthermore, international mutual funds investment means you can take advantage of another country’s progressive market while your own is experiencing a grave economic downturn.
Important Notes
The first thing you should do when deciding whether or not to invest in international mutual funds is to analyze your own financial status. How much are you willing to risk and how long can you wait for your money to gain profit? More to the point, what percentage of your assets does the amount you are willing to invest represent – that is, is it part of your disposable assets and will losing it significantly affect your credit standing and make you financially insolvent? You are advised not to borrow money to invest in stock and security markets. These investments – in fact, all investments – come with risks; therefore, there is no guarantee that it will return profit or even return the money you have borrowed. If you don’t borrow the money you invest – e.g. if you use part of your own savings – and you lost all of your investment, at least you could return to a state that is more or less the same one from which you have come; you’d be thousands of dollars poorer, perhaps, but at least you’d not be thousands of dollars in debt.
The next step is to do intensive research on international mutual funds. It’s a rule of thumb to always know a lot about where you’re investing your money. Ask around and decide if the advantages of this type of mutual fund outweigh its risks.
Third, compare your options. Prospectuses and other relevant information regarding various international mutual funds are available online and these should help you decide on which fund to put your money into. It may also be beneficial to seek the help of a financial advisor as he can tell you what percentage of your assets is worth investing in an international mutual fund. Furthermore, make sure that your chosen mutual fund managers are professional, capable and experienced. You can just as easily lose your money due to an inept mutual fund manager as you can due to unfriendly market conditions.
Lastly, never decide based on how well an international mutual fund did the previous year. Remember that the economic situation, the value of currencies and a lot of other significant factors will be different now from what they were in the past year. Decide based on the ability of the fund manager and his strategies, your goals and needs, your timeline, long-term performance, profit viability of the fund’s holdings, and the level of risk you are willing to take. At the end of the day, no matter how small an amount you are going to invest, this is still your money– your hard-earned money – at stake.
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