Few people would argue we live in a global economy. If that’s the case, why limit our investment portfolios to domestic companies? An international fund (or foreign fund) invests only outside your home country. They primarily invest in the common stocks of companies based in overseas markets. Global funds invest anywhere around the world, including your home country
Are international mutual funds riskier or safer than domestic investments? They do tend to be more volatile and have unique country and/or political risks. Some investment advisors believe they have inherently more risk than domestic investments. However, there are hundreds of international mutual funds from which to choose. You can choose funds in France, Japan and Germany — which tend to be more stable, or you can pick international mutual funds in less stable countries like Thailand or Peru.
International mutual funds can, as part of a well-balanced portfolio, actually reduce risk by increasing diversification. Just like with the US markets, investing in international mutual funds rather than individual stocks can be a way of balancing those risks. Although the world's economies are becoming more inter-related, it is likely that another economy somewhere is outperforming the economy of your home country.
Choose international mutual funds carefully, just as you would any other addition to your investment portfolio.
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