International and Global Funds
Many investors assume international and global funds are the same. They're not. While global funds include securities from the whole world, international funds do not include securities from the home country of the investor. So, to an American, an international fund would not include U.S. securities, but a global fund might.
Many international funds spread your investment around, buying into markets worldwide, while others look at the economic potential of one country. International specialized funds have not fared well over the past three or even five years. Recent returns are also down, largely as a result of the worldwide financial crisis that started in 2008.
International funds can be further focused as regional or single-country funds. Regional funds put your investing dollars in a specific geographical area, such as Asia or South America, offering you broad access to a small region. Single-country funds, as the name clearly states, buy up securities issued in a single country. Mexico, Japan, and Germany are among the most common.
Usually not the place for a beginning investor, international specialized funds can be risky because of the high volatility of many overseas markets. For that reason, it may be best to strictly limit your holdings in these funds to a small portion of your total portfolio. Remember, other funds you hold may already be investing a small portion into overseas investments, thus dabbling in the arena and letting you have some foreign diversification. Changes in currency and politics make it hard to assess, even for fund managers, what the future investing climate will be on a global basis.
