Explorers find gold overseas

3 funds prove smart in discovering hot firms

Your Money

October 21, 2007|By Andrew Leckey | Andrew Leckey,TRIBUNE MEDIA SERVICES

International investing carries risks, but some funds find ways to reduce them.

The political, economic and currency situations in foreign countries provide alternate periods of exhilaration and worry. The adventure can be rewarding but gut-wrenching.

Yet some international funds with solid returns find ways to limit volatility, whether by diversifying among myriad countries, uncovering value-oriented firms or devoting only a portion of their portfolios to less-predictable emerging markets.

Conservative international funds will experience down periods like any other mutual fund because great returns never come without some risk. But while hotshot competitors may outperform in a given quarter or year, more sensible choices reliably diversify a long-term personal portfolio that is heavy in U.S. holdings.

"The more conservative foreign funds tend to invest in larger foreign companies with diversified revenue streams and consistent earnings growth," said Annie Sorich, analyst with Morningstar Inc. in Chicago.

"Yet some funds heavily invested in emerging markets may be diversified enough overall to have low volatility despite the contribution from the riskier segment, Sorich noted.

"An investor diversifies with a foreign fund," she said. "If the U.S. economy tanks, U.S. funds will tank with it."

Andrew Leckey writes for Tribune Media Services.

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