Going Global

In response to problems in the credit markets in 2008, central and private banks around the globe joined together to search for solutions. It was another example of how interconnected the world’s markets and economies have become. The lesson is that globalization may be creating new investment opportunities that you could miss if your portfolio is stuck in the states.

One way to expand your portfolio’s geographic boundaries is through international mutual funds. Over the past quarter-century, the profile of international mutual funds has risen dramatically. In fact, during this period, international stock mutual fund assets doubled to make up 10% of the $11 trillion invested in mutual funds.1

International funds enable investors to diversify not only across industry sectors but national borders as well. Despite this benefit, international mutual funds come with additional risks that should be considered carefully.

Lost in Conversion?

The dollar has a record of stability, but its recent weakness is a reminder that dollar-denominated investments are not immune to outside influence. Investing abroad offers the opportunity to diversify away from the dollar, although currency fluctuations also pose unique challenges. For example, fluctuations in exchange rates can increase purchasing power but can also dilute the value of investment gains.

Politically Correct?

Developing nations may have the potential for some astounding growth, but they also come with serious risks. Political problems and regional instability can affect business climates. Civil unrest, elections, terrorist attacks — even rumors of such events — can affect investment values.

The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

1) The Wall Street Journal, January 10, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.
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