Global vs. International: What’s The Difference?

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Global vs. International: What’s The Difference?

by NCA Financial … on Oct 11, 2018

Stock Market, Investments

With international stock markets comprising nearly two-thirds of the world’s capitalization, a broad range of investment opportunities exist outside the borders of the U.S.

For investors who are looking to diversify their mutual fund portfolio with exposure to companies located outside the U.S., there exist two basic choices: A global mutual fund or an international mutual fund.

By definition, international funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks.

Make a Choice

The definition may seem clear, but what may seem less clear is why an investor might select one over the other.

An investor may select a global fund in order to give her portfolio manager the latitude to move the fund’s investments between non-U.S. markets and the U.S. market. This may give the manager the flexibility to take advantage of shifting opportunities that could be present at any given moment.

By investing in a global fund, the challenge for the investor is that he may not know at any point in time his total exposure to the U.S. market, within the context of his overall portfolio.

An Inside Look

Some investors choose to manage their risk by setting the desired asset allocation for their portfolio and then identifying funds that are within those asset classes. For these investors, an international fund may make more sense, since it allows them to maintain a greater adherence to their desired domestic/international stock allocation.

Keep in mind that asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

As you consider a global or an international fund, you should also be aware of the fund’s approach to the inherent currency risks. Some funds choose to engage in strategies that may mitigate the effects of currency fluctuations, while others consider currency movements—up and down—to be an element of portfolio performance.

 

 

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. International investing involves additional risks including risks associated to foreign currency, limited liquidity, government regulation, and the possibility of substantial volatility due to adverse political, economic and other developments. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

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