International Mutual Funds

Provide access to high growth value investing opportunities!

International mutual funds invest in shares of companies listed on share markets outside the domestic market.

They include funds that specialize in a particular sector such as biotechnology, or a particular region such as Asia, or which adopt a particular approach such as value investing.

Investing in overseas shares may provide access to high growth opportunities such as the world's leading pharmaceutical, aerospace and electronics companies.

Managed funds offer a convenient and easy way to tap into these international opportunities.


Classes of Funds

The various classes of funds include ...

• International funds that buy only foreign securities
• Global mutual funds that most likely spread their investments across domestic and foreign securities
• Regional mutual funds that concentrate on markets in one part of the world e.g., Japan
• Emerging mutual funds that focus on developing countries and the securities listed on exchanges in those countries

Other Fund Types

Other types of international funds include ...

• international index funds
• international small cap funds
• international bond funds

international exchange traded funds

Additional risks

An additional risk with these funds that is absent from domestic investments is currency risk.

The exchange rate of the domestic currency to the foreign currency will fluctuate at the same time as the investment, which can easily increase, or reverse, substantial gains abroad.

Further risks may include...

• less information available for investment decisions
• actions of foreign governments
• political & social instability
• regulatory restrictions
• market liquidity issues

By investing in international mutual funds, investment portfolios become further diversified because these funds can expose you to industries that may not be well represented in your domestic market.

There may also be times when your domestic share market is weak but some overseas markets are performing well.

While over the longer term international mutual funds should provide strong returns if a value investing approach is followed by the managers of the fund, they can experience periods of volatile returns and even negative returns.


My Approach

I maintain investments in international, regional and sector specific mutual funds in order to diversify my portfolio and gain exposure to markets that would otherwise not be available to me.

My investment requirement is that the funds have published performance data over at least five years (and preferably ten) and can demonstrate a net historical performance over the time span of at least 12-15%.

An added requirement is that the employees/owners of the fund are heavily invested in the fund. There is no better incentive than having your own money on the line.

That narrows the field very considerably. My selling policy also applies to these funds.

These requirements ensure that I am more likely to invest in the best international mutual funds.

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