How to Choose an International Stock Fund
Gregg Wolper explains the similarities to and differences from investing in U.S. stock funds.
Gregg Wolper: Choosing or analyzing an international stock fund is really pretty similar to choosing one for U.S. stocks. There's many similarities. You want a fund with a strategy that you understand and that you're comfortable with and that makes sense to you. There should be an experienced manager in charge with a team with long tenures, if possible. Of course, cost is very important. You might have to pay a little bit more for an international stock fund, but you don't have to pay that much more. Cost is still important as with any fund. And performance, of course, you want to see some good long-term performance.
But there are some differences. Currency exposure, that's the main difference. When an international stock fund buys foreign stocks, they do it in foreign currency. So, you'll have exposure to foreign-currency movements. Some funds hedge that currency exposure back into the dollar, most don't, or some do it partially. But that's OK to have exposure to foreign currencies. Probably most of your portfolio, and if you own a house, most of your assets are in U.S. dollars. So, there's nothing wrong with having some exposure to foreign currencies. It's just a good idea to keep that in mind. That it will affect returns positively, sometimes negatively at other times.