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Fund Spy

Five Terrific Sources of International Spice

These fine foreign funds have more than their share of diversification value.

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The exact portion varies from fund to fund and over time, but foreign large-cap offerings normally invest the lion's share of their assets in blue chips from developed markets. Funds that focus on foreign smaller caps and offerings that concentrate on emerging-markets stocks, therefore, make the best complements to most investors' core international holdings. And there are a number of good to great options in the foreign small/mid-growth, foreign small/mid-value, and diversified emerging-markets categories.

Of course, some investors have the resources to build a multi-fund international portfolio and thus have the freedom to supplement their core foreign holding with both a foreign small/mid-cap fund and an emerging-markets offering. Other investors are naturally drawn to one type of complementary international fund or the other, either because of their personal tastes or because of the composition of their foreign large-cap offerings. For example, those especially keen on the growth prospects in the developing world have considerable incentive to add a dedicated emerging-markets offering, while those who own a giant-cap-oriented core foreign fund with a large emerging-markets stake likely would choose a foreign small/mid-cap vehicle as their diversifier.

But investors looking to get exposure to both small/mid-size stocks and emerging markets in the same fund do have some good alternatives. Below are details on several such offerings.

William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.