Types of International Mutual Funds
February 16, 2009 by MOYMJennifer
Filed under Investing
When we hear the term ‘international mutual fund’, we always assume it is equivalent to investing money into stocks and bonds and various portfolios worldwide. However, in the financial world, this is not entirely accurate. There are actually several types of international mutual funds and not all deal with investments worldwide. Awareness of available options may help one come up with an intelligent decision on which type of fund to invest in.
International Funds
An international fund, also called foreign fund, is one that invests in countries outside of the United States. This is of course, coming from the point of view of an American investor.
Global Funds
A global fund is one that invests all over the world, thus the term global. Such funds have holdings in various markets all over the world: including that of the United States. A global fund comes with the advantage of being able to capitalize and gain on progressive markets worldwide while being able to offset any losses incurred in some of the less stable countries.
Regional Funds
If you are not comfortable investing in a “come one, come all or come anyone” global fund that can have holdings in countries you are not entirely comfortable investing in (say, due to political instability, the possibility of civil war, extensive corruption, terrorism, etc), you can opt for a regional fund instead. A regional fund invests only in one specific geographic area, say only in the Asia-Pacific or in Europe. This way, you limit your investment only in countries which you believe are progressive and less-risky to invest in. Of course, if economic problems assail the entire region, your regional fund – and thus you – can suffer great losses.
Country Funds
Country funds are just like regional funds except of course, as the name suggests, it only invests in one specific country. If you are a resident/citizen of the country you have chosen, then you can consider your investment a domestic investment. If you choose a different country, then it is foreign and thus an international investment.
This type of funds gives you the advantage of being able to closely monitor where your money is going. Instead of needing to keep track of global or regional market conditions, you need only focus on a single country’s market. Of course, you would still need to incorporate global and regional conditions in your country fund investment decisions, but you’d now be looking for factors that can affect your investment indirectly rather than those that can have direct and immediate impact on your investment profits.
Global Sector Funds
Global Sector Funds are industry-specific global funds. The funds’ holdings can be found anywhere in the world, but they pertain only one ‘sector’ or one industry, say only the real estate sector, or only the food manufacturing sector, or only the banking sector, etc. The fund manager is given the freedom to invest money into practically anything as long as it is within the investor’s chosen sector. At a time when even the most stable companies’ shares were valued way lower than that of business process outsourcing and call center companies, investing in a global fund in the BPO sector can be a brilliant move.
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