The International Equity Fund

Investing in international equity funds allows investors an alternative to the traditional mutual fund. There are a number of international equity funds that have grown in popularity in recent years. Here are the basics of the international equity fund and what you can expect from them as an investor.

International Equity Funds

In order to understand the benefits of an international equity fund, you first need to understand what an equity fund is. An equity fund is a mutual fund that is made up almost entirely of stocks. It can be managed actively or passively, depending on the strategy of the fund. Most traditional mutual funds will include bonds, CDs or other investments in addition to stocks in an effort to diversify the portfolio away from the stock market.

Equity funds do not utilize this type of diversification, instead they invest solely in stocks. An international equity funds do this on a global level. Therefore, they might pick a particular region to invest in and then only buy stocks from that region. An international equity fund could also try to diversify across several different markets at the same time. There are many different strategies that these funds employ and all of them have unique benefits associated with them.

Regional Growth

One of the major benefits of investing in this type of fund is that it allows investors to take advantage of areas of regional growth. Certain markets tend to explode over a period of a few years. If an investor could get in at the right time with these markets, they can make an exceptional profit. Areas with development are prime areas for this type of investment. For example, the Asian market has started to grow rapidly in recent years. It is starting to develop at an alarming rate compared to other areas of the world. Therefore, an investor can easily purchase shares in an international equity fund that focuses on the Asian market and take advantage of this growth.

Diversification

Most investors know very little about markets outside of the one that they live in. While there are a few investors that take special notice of foreign markets, the majority of investors do not. Therefore, if these casual investors were to try and pick particular companies to invest in, the results could be disastrous. They would know very little about the individual companies and would usually pick the wrong companies to invest in.

An international equity fund seeks to overcome this problem for the average investor. The fund invests in a large number of stocks from different companies in that region. The fund does all of the research for you and makes all the investment decisions on your behalf. You simply buy the shares, hold them as long as you would like, and then sell them to realize a profit. This makes international investment much easier for the average investor.

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