International mutual funds typically seek investments in assets in countries outside their investors’ nation of residence. Investing in international mutual funds helps investors diversify their portfolios and expand their investment horizons, which could increase their returns on investment. International mutual funds typically invest in assets of particular countries or geographical regions, diversifying between emerging and developed market economies.
When considering investing in an international mutual fund, be aware that risks and returns could vary considerably from country to country for a number of reasons, including shifts in foreign exchange rates. In the following article, Benzinga explains how to choose and invest in the best international mutual funds currently available.
Quick Look at the Best International Mutual Funds:
- Wasatch International Growth Fund Institutional Class
- American Funds New World Funds Class A
- Templeton China World Funds Class A
- T. Rowe Price European Stock Fund
- Quick Look at the Best International Mutual Funds:
- Benzinga Favorite Mutual Fund Brokers
- What Is a Mutual Fund?
- What to Look for in a Mutual Fund
- The Benefits of a Mutual Fund
- Are International Mutual Funds a Good Investment?
- Frequently Asked Questions
International mutual funds give investors return opportunities that would probably not be available by investing solely within the United States. They also offer a great way to both diversify and find profitable foreign investment opportunities. To help you select a top international mutual fund to invest in, Benzinga has compiled a list of the best international mutual funds that could work for investors of all types. You can examine our picks below:
Wasatch International Growth Fund Institutional Class (MUTF: WIIGX)
The Wasatch International Growth Fund has long-term capital growth as its objective and primarily invests in high-quality, small-cap growth companies outside the U.S. The fund uses an active, collaborative, fundamental, bottom-up approach in selecting its investments.
The fund’s criteria for investing in foreign companies consist of a capitalization under $5 billion, strong financials, a sustainable competitive advantage and earnings growth that outperforms in its relevant sector or industry. The International Growth Fund has a 14% year-to-date (YTD) return in 2021 and an average yearly return of 12.13% over the last 10 years.
In the fund’s latest quarter, it gained 5.58%, thereby outperforming its benchmark, the MSCI ACWI ex USA Small Cap Index. The fund’s Japanese holdings showed excellent returns, and its emerging market position significantly outperformed the benchmark emerging market index that declined in the same period.
American Funds New World Fund Class A (MUTF: NEWFX)
The New World Fund is managed by the Capital Research and Management Company and co-managed by Capital World Investors, Capital Research Global Investors, Capital Fixed Income Investors and Capital International Investors.
The international fund invests in fixed-income and public equity markets of emerging nations all over the world. The fund seeks to invest in diversified sectors and invests primarily in growth and value stocks of companies of all market capitalizations. The fund’s fixed-income positions consist mostly of corporate and government bonds.
The fund’s largest holdings are in the technology, financial, healthcare, consumer cyclical, industrial and communications stocks. The fund’s YTD return is 19.89%, and it had an average yearly return of 8.10% over the past 10 years.
Templeton China World Fund Class A (MUTF: TCWAX)
The Templeton China World Fund Class A is an equity mutual fund that seeks long-term capital appreciation by investing 80% of its funds in Chinese companies. For the fund’s investment purposes, such companies (1) were formed and organized under the laws of China, Hong Kong or Taiwan, (2) have their principal trading market in China, Hong Kong or Taiwan, (3) obtain at)least 50% of their revenues from goods and/or services sold or produced in China or (4) have at least 50% of their assets in China.
The fund uses the MSCI China Index-NR as its benchmark index, and it boasts a total of $140.14 million in net assets and $210.34 million in total net assets. The TCWAX fund has not fared well so far this year, showing a loss of -7.07% without sales charges and -15% with sales charges, versus a loss of -7.33% for its MSCI China Index-NR benchmark. The TCWAX has averaged a yearly return of 5.65% over the past 10 years and a 7.47% annual yield since its inception in 1993.
The fund’s largest holdings include media and entertainment company Tencent Holdings ADR (OTCMKTS: TCEHY) with a weight of 13.15%, international retailer Alibaba Group (NYSE: BABA) with a weight of 8.65% and Chinese retailer Meituan (OTCMKTS: MPNG) with a weight of 4.72%. Alibaba’s stock has seen considerable pressure over the past year, losing about half its value from its October 2020 peak.
T. Rowe Price European Stock Fund (MUTF: PRESX)
The primary investment objective of the T. Rowe Price European Stock Fund is long-term capital growth by making investments in the common stock of companies located in Europe. The fund’s criteria for investing consist of quality management, a strong franchise, strong cash flows and reasonable valuation.
The fund concentrates its investments in Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
The fund has net assets of $1.3 billion and boasts an impressive YTD return of 17.54% for the Investor Class shares. Investor Class (CUSIP #77956H401) shares of this fund have a minimum investment amount of $2,500 and minimum subsequent investment amounts of $100. In contrast, the more elite I Class shares (CUSIP #77956H310) have a minimum investment of $1,000,000 and no minimum subsequent investment amount.
Benzinga Favorite Mutual Fund Brokers
In order to buy mutual funds, you might want to select a suitable broker to handle the transaction, although some funds can be invested in directly. If you do decide to use a broker, Benzinga has taken the hard work out of finding a good one to purchase mutual funds through by compiling the list of our favorites below.
What Is a Mutual Fund?
Mutual funds consist of investment products managed by professionals who invest in specialized types of assets or groups of assets to achieve the mutual funds’ objectives, which are typically income and growth. Mutual funds are funded by pooled money obtained from many investors.
Most mutual funds invest in stocks, bonds and short-term money market instruments, although some mutual funds specialize in commodities, futures and other financial derivatives. Investing in some mutual funds will involve more risk depending on the type of investments its management makes but might yield higher relative returns if those investments turn out to be profitable.
What to Look for in a Mutual Fund
Mutual funds can be actively managed funds where portfolio managers typically select investments to outperform a benchmark. They can also be index funds where the managers seek to reflect a specific index’s performance by mirroring its components.
Some of the most common types of mutual funds to invest in and their typical investment strategies include:
- Equity funds: Invest in large-capitalization, mid-cap and small-cap stocks.
- Asset allocation funds: Allocate a percentage of investment capital to stocks and fixed income.
- Fixed income funds: Invest in government bonds and investment-grade corporate bonds.
- Index funds: Invest in index component stocks to mirror an index’s performance, such as the S&P 500 index.
- Commodity funds: Invest in commodity-intensive stocks such as oil, gas and mining stocks. Some funds invest in physical commodities, such as gold, silver and platinum.
- Socially responsible funds: This type of fund uses non-economic principles in their weighting and selection of securities. These principles include environmental, ethical and religious views.
- Money market funds: Invest in short-term debt instruments like U.S. Treasury bills and certificates of deposit (CDs).
- International fund: Invest in securities markets all over the world, except for U.S. markets.
- Global fund: Invest in securities markets from both the U.S. and foreign countries.
Much like investing in individual stocks, the best mutual fund to invest in depends in large part on your particular investment goals and your level of risk tolerance. For example, if your investment goals are income, then you might want to choose a fixed income or money market fund that pays regular dividends.
If your objective is income and growth, then an asset allocation fund might be more suited to your goals. Alternatively, if you prefer riskier investments for the potential of higher-than-average returns, then a commodity or international fund might be a better fit for you.
The Benefits of a Mutual Fund
Investing in mutual funds has a number of important benefits. For example, you’ll generally take less risk by investing in a mutual fund than by investing in individual stocks or bonds, since you are investing in a basket of assets managed by professional fund managers.
Other important benefits of mutual funds include:
- No experience necessary: Investing in mutual funds requires no previous knowledge or specialized training in economics or trading. Anyone can successfully invest in mutual funds, regardless of their background or financial experience.
- Easily accessible: You can open an account with a major mutual fund such as Vanguard Group Inc. in minutes. Also, just about every major brokerage company, discount brokerage or bank will offer mutual funds as an investment choice.
- Variety: Mutual funds can give you a wide variety of asset classes to invest in, including precious metals and a full range of economic sectors and industries.
- Affordable: You can invest in mutual funds with a low minimum deposit. If you invest through a 401(k) plan or through an employer’s retirement plan, you may even be exempt from making a minimum deposit to begin investing.
- Diversification: With mutual funds, you’ll be investing in hundreds — if not thousands — of different companies, thereby allowing you remarkable portfolio diversification just by investing in a single mutual fund.
- Savings vehicle: Conservative mutual funds can let you safely invest for the long term, which makes mutual funds an excellent investment for 401(k) plans and individual retirement accounts (IRAs).
Are International Mutual Funds a Good Investment?
For busy people with a lot on their plate, mutual funds offer a great way to invest without having to spend the time developing market expertise and directly managing your investments.
International mutual funds also help investors diversify their holdings into foreign markets and can act as a hedge to a portfolio already heavy in domestic investments. For seasoned and new mutual fund investors, Benzinga offers cutting-edge research on international mutual funds and can be an invaluable resource for investing in them.
Frequently Asked Questions
Can I invest in international mutual funds?
Just about anyone based in the U.S. with a suitable amount of cash can invest in international mutual funds. Check with your broker, bank or other financial institution about investing in international mutual funds to see what funds are available to you.
Should I invest in international mutual funds?
As with any other type of investment, whether you should invest or not in international mutual funds depends on your investment goals and risk tolerance. If you have money to invest and would like to diversify your domestic holdings or access potentially higher returns abroad, then international mutual funds could work well for you. Remember that shifts in foreign exchange rates can impact the performance of international mutual funds, so that might also affect your decision to invest in them.
What are the best international mutual funds?
You can find a list of the best international mutual funds on the list above.