Unlike mutual funds focussing exclusively on international
markets, global funds do not exclude the investor's home country
from the investment portfolio. This provides an opportunity for
wider diversification, since the portfolio's risk factor is not
dependent on domestic factors alone. Again, foreign markets may
provide the opportunity for higher returns. However, the prospect
of other risks arising from currency fluctuations and political
risk factors from foreign markets remain.
The Domestic Scenario
Equity markets continue to be ebullient and have remained largely
unaffected by a slow economic recovery. However, the recent partial
government shutdown and a resultant impasse over the debt ceiling
have shown how fragile the situation remains. The Federal Reserve
is of the view that economic data is not strong enough for it to
proceed with the proposed tapering of its bond buying programme.
Emerging Markets Slow Down
Developing economies have also shown weakness this year on the back
of weak demand from mature markets. This is particularly true of
countries such as China which follow an export oriented model of
Experts view the situation as an attempt by that nation to reorient
its economic model towards one which will increasingly cater to
indigenous demand. However, ultimately this has led to downward
revisions to growth projections. This is true of other economies
such as India which have also been affected by global factors
Resurgence in Europe
The Eurocoin Indicator has increased for the month of October to
0.2% from 0.12% in September. This reading of the index, which is
compiled jointly by the Bank of Italy and the London-based Center
for Economic Policy Research, indicates that the economy has gained
strength at the beginning of the fourth quarter, marking its second
consecutive monthly increase.
The increase has come on the back of higher share prices and an
increase in foreign trade and industrial production. This clearly
shows that the Eurozone's economy is gaining momentum which may be
sustained over time.
It is clear that diversifying across nations might be an optimal
strategy given the current situation. Below we are presenting three
mutual funds, each of which invests globally and have high returns,
as well as the best possible Zacks Rank.
Mutual Fund Picks
AllianzGI Global Small-Cap A
Launched in February 2002, this fund has total assets of $ 130.51
million. It invests heavily in companies whose size is similar to
those which are part of the MSCI World Small-Cap Index. The fund
invests in a minimum of eight countries which may include the U.S.
Most of its foreign investments are made in companies located in
Western Europe and Japan. The fund has a year-to-date return of
The fund holds 195 assets and its top 10 holdings account for 9.09%
of its investments. The asset it is most invested in is Yoox Spa
(SPWR). which makes up 1.10% of its assets. The next two,
Nationstar Mortgage Holdings Inc
Lions Gate Entertainment Corporation
(LGF), together make up 1.88% of its assets. The fund has a three
year annualised return of 19.78% and has a Zacks Rank #1(Strong
American Funds New Economy A
This is the largest of our choices with total assets of $10.40
billion and was launched in December 1983. It focusses on investing
in common stocks of growth oriented companies. The fund looks to
invest in companies which can utilise innovation and new technology
to cater to the needs of the global economy. This fund has a
year-to-date return of 34.82%.
The fund holds 192 assets and its top 10 holdings account for
21.13% of its investments. The asset it is most invested in is
Galaxy Entertainment Group Ltd. which makes up 3.44% of its assets.
The next two,
Gilead Sciences, Inc.
(NFLX) together make up 6.19% of its assets. The fund has a three
year annualised return of 17.83% and has a Zacks Rank #1(Strong
Guinness Atkinson Global Innovators
Launched in December 1998, this is the smallest of the funds with
total assets of $44.36 million. The fund focusses on investing in
companies which are poised to benefit from improvements in
communication, technology and new management practices. A minimum
of 40% of its assets are utilised to purchase global securities.
This fund has a year-to-date return of 34.84%.
The fund holds 28 assets and is concentrated around its top 10
holdings, which account for 42.41% of its investments. The asset it
is most invested in is
Best Buy Co., Inc.
(BBY) which makes up 5.19% of its assets. The next two,
Holding Corp. TD Ameritrade Holding Corp.
State Street Corporation
(STT), together make up 8.62% of its assets. The fund has a three
year annualised return of 16.92% and has a Zacks Rank #1(Strong
Diversifying across the global comes with its own sets of
opportunities and challenges. However, given the current economic
situation this may be a god strategy. This is why these three funds
would make excellent additions to your portfolio.
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