Global vs. International: What’s The Difference?

With international stock markets comprising about two-thirds of the world’s capitalization, a broad range of investment opportunities exist outside the borders of the U.S.¹

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.²,³

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.

The reason that an investor may select a global fund is to provide the portfolio manager with the latitude to move the fund’s investments among non-U.S. markets and the U.S. market in order to take advantage of the shifts in relative opportunities these markets may present at any given moment.

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

An Inside Look

As a consequence, some investors want to manage their allocation risk by setting the broad 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.

Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

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.

  1. The World Bank, August 2013. Market capitalization figures are through December 31, 2012.
  2. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.
  3. International investments carries additional risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2013 FMG Suite.

Post by Phil Ratcliff

Phil Ratcliff, President of rebel Financial, is a senior financial advisor that holds an AIF®, CFP®, ChFC®, and CLU® certifications. He started his career at American Express Financial Advisors in 2003, then moved to AXA Advisors for 7 years before founding rebel Financial LLC in 2013.

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