International Mutual Funds

There are many types of international mutual funds - funds that invest only
overseas. Below is a brief description of the different types of international
stock, or equity, funds. 

International Equity Funds

The most popular and widely held international equity funds invest in the stocks
of "established" markets, which include prominent European countries (the
United Kingdom, Germany, and France) as well as certain Pacific Rim nations
(Japan, Hong Kong, and Australia). 

The investment objective of most broadly diversified international stock funds is
long-term growth, although some value-oriented funds may place modest
emphasis on current income. 

The investment strategies of international funds vary widely. Some funds
emphasize investments in particular countries rather than individual stock
selections, hoping to capitalize on those countries that will enjoy the highest
future economic growth. Other funds employ a more fundamental investment
approach that focuses on the most promising companies, regardless of the
countries in which they operate. 

Another approach employed by international stock funds is called indexing. An
international index fund seeks to match the performance of a group of securities
that form a recognized market measure, known as an index. The most
prominent index of established international markets is the Morgan Stanley
Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index. 

Regional Funds

International funds that invest in stocks in a particular geographic region, such as
Europe or the Pacific Basin, are known as regional funds. By concentrating in a
single region, the share prices of these funds typically fluctuate more than the
share prices of broadly diversified international stock funds. 

Single-Country Funds

International stock funds that invest in a single foreign country, such as Japan,
are called single-country funds. These funds are considered highly risky because
of their narrow focus. 

Many single-country funds are closed-end mutual funds. In other words, their
shares trade on an exchange, often at sizable discounts or premiums relative to
the net asset value of the fund's shares. 

Emerging Markets Funds

Some mutual funds invest in the financial markets of countries that are evolving
from an agricultural or socialist economy to an industrial free market, such as
Argentina, Indonesia, or Turkey. These mutual funds are generally called
emerging markets funds. The financial markets in emerging countries offer the
potential for higher rates of economic growth than the more mature markets of
the United States, Western Europe, and Japan. 

Global Funds

Mutual funds that invest in both U.S. and foreign stocks are known as global, or
world, funds. Like international stock funds, global funds typically seek
long-term growth. But global funds may duplicate some U.S. stocks already
owned by investors who have broadly diversified holdings. Such investors may
prefer to use funds that invest only in foreign stocks.