Keep the Short-Term Returns of These Overseas Funds in Perspective
These international funds have lagged lately, but they remain good long-term holdings.
There has been some turbulence along the way, but the vast majority of overseas large-cap stocks have soared since the world's equity markets reached their most recent nadir in early March 2009. European and most other developed-markets blue chips have posted hefty gains, in fact, while most emerging-markets issues have earned huge returns, and big firms from across the sector spectrum have produced impressive results. As a result, the average foreign large-value, foreign large-blend, foreign large-growth, and world-stock funds have posted 70% to 75% annualized returns from March 10, 2009, through March 25, 2010.
In such favorable conditions, it's natural to be disappointed with any core overseas fund that has earned subpar gains. But it would be a mistake to make too much of how the international large-cap fund that you own--or that you are considering--has fared during this period. Shorter-term returns, even in an exceptional 12-month rally, still aren't very meaningful. And longer-term returns, which ideally include results from more than one rally as well as more than one downturn, remain the best way to evaluate a fund's performance, while risk measures, management quality, and other factors continue to play crucial roles in the overall assessment of any offering.
Moreover, a number of the international large-cap funds that have lagged in the current surge are well-established offerings that boast many strengths and good long-term prospects. It would be short-sighted to abandon or ignore such offerings, of course, and we've decided to highlight three of them here.
William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.