Most investors who want “set it and forget it” investments often find themselves invested in S&P 500 trackers such as Vanguard 500 Index Fund Investor Shares (MUTF:VFINX) or the T. Rowe Price Equity Index 500 Fund (MUTF:PREIX). However, those funds invest primarily in U.S.-based equities and tend to enjoy limited international growth.
America’s share of the world’s gross domestic product (GDP) stands at just under 25%. This leaves investors with little exposure to 75% of the world’s economic activity.
Moreover, much of this activity takes place in developing markets such as China and India. These markets each have more than four times the population of the United States. They also enjoy higher growth rates than a developed market such as the United States.
In fact, American investment guru Jim Rogers has gone so far as to declare the 21st century the “century of Asia.” He now resides in Singapore for that very reason.
Fortunately, mutual funds geared toward international growth exist for such investors. Some offer low initial investments, lower than average risk and management fees below the 1.25% average. Investors wanting to enjoy some of that international growth should look at the following funds:
Columbia Global Strategic Equity Fund Institutional Class (NGPAX)
The Columbia Global Strategic Equity Fund Institutional Class (MUTF:NGPAX) invests a minimum of 80% of its funds into offshore securities, including common and preferred stocks and ADRs.
Technically this stands more as a global growth fund as the fund currently allocates about 48% of its funds to U.S. stocks and 46.5% to non-U.S. assets. Moreover, the fund focuses heavily on the developed world. Just over 20% of the fund focuses on the developed markets in Europe. Japanese investments make up an additional 15%, more than its combined positions in the remainder of Asia.
The fund managers also show a preference for investing in other Columbia funds rather than stocks individually. Its top holding is currently the Columbia Disciplined Value Fund Institutional 3 Class (MUTF:COLYX) at an allocation of just over 10%. Tech and financial services companies make up over 40% of its current investments.
While its 10-year performance record exceeds 8%, its 5-year and 1-year records have almost 10.7% and 18.75%, respectively. Fee expenses currently stand at 1.02%, and the fund requires $2,000 for an investment.
DFA Japanese Small Company Portfolio Institutional Class (DFJSX)
When investing in international growth, some investors prefer to reduce risk by investing in developed markets. In this regard, Japan remains a favorite. The country became the first Asian country to become developed and is in close proximity to rapidly developing Asian markets. The DFA Japanese Small Company Portfolio Institutional Class (MUTF:DFJSX) fund is one option for investing in Japan.
As the name implies, all equity positions, over 99% of the fund, focuses on small companies in Japan. However, within Japan allocations are diversified. Industrials, consumer cyclicals and tech stocks make up a combined 63% of the fund. The fund also makes direct, but small positions. Its largest holding, a basic materials company called Tokuyama Corporation, makes up only 0.33% of the fund’s assets.
DFJSX also sets favorable conditions for investors. It does not list a minimum investment requirement and charges fees of 0.54%. Its returns have also improved over time. The fund returned an average of 8.88% over the last ten years. However, three-year and one-year performances stand at 16.5% and 24.4%, respectively.
Matthews Asia Dividend Fund Investor Class (MAPIX)
Those who want to benefit from Asian growth and want an “S&P 500 of Asia” should look at the Matthews Asia Dividend Fund Investor Class (MUTF:MAPIX). Cyclical stocks make up about half the portfolio, while sensitive stocks make up about 31% and the remainder allocated to defensive stocks. Consumer cyclical, financial services and tech make up the fund’s largest sectors and account for more than half of the fund combined.
As for country splits, the fund invests just over 26.5% of its assets in Japan and just under 29% in other developed markets in Asia. Emerging markets make up over 40% of the Matthews Asia fund.
Returns for the fund have averaged 9.39% over the past ten years. Three and five-year averages closely mirror that figure, although the fund saw a return of 18.41% over the last year. And at 1.06%, the fund’s expenses remain well below the average. Investors can get in with as little as a $2,500 investment.
Matthews India Fund Investor Class (MINDX)
Some investors may want to take the “century of Asia” to specific developing Asian countries. If so, India could present an interesting opportunity through the Matthews India Fund Investor Class (MUTF:MINDX) for international growth. At an estimated 1.324 billion people, demographers estimate it will become the world’s most populous country by 2024. Serving this large, growing population presents a compelling investment opportunity.
Managers heavily weigh the fund in financial services, consumer defensive and consumer cyclical stocks. Still, it invests modestly in U.S. and Japanese equities. Japan-based Suzuki Motor Corp is the company’s largest holding. However, Indian companies make up 90% of the fund’s investments.
The average ten-year return is 8%. However, its recent performance exceeds that average. The fund earned 13.36% over the last year and averaged 15.73% over the last five years.
Investors can get in with a $2,500 minimum investment and will pay expenses of only 1.12%.
T. Rowe Price International Discovery Fund (PRIDX)
The T. Rowe Price International Discovery Fund (MUTF:PRIDX) targets small and mid-cap stocks based mostly outside of North America.
Most of all, its holdings will be unfamiliar to American investors. Its largest holding at 1.33% of the fund is Italy-based YOOX Net-a-Porter Group, an online retailer. However, tech stocks make up less than 20% of its asset base.
Consumer cyclicals, its largest sector, makes up about 23% of its holdings. Its assets remain almost equally split between Europe and Asia, both of which make up just over 45% of the fund. Still, its European assets invest in developed markets. The company splits its investments in Asian stocks between Japan and emerging markets, with small amounts in other developed countries in Asia and Australia.
PRIDX boasts a strong, long-term track record of benefiting from international growth. Its 10-year return has averaged just over 8%-per-year. However, going back to its inception in 1988, the fund returned an average 10.82%-per-year over the 30-year period. Its more recent returns have proved even stronger, averaging 13.35% over the last five years, and 34.34% over the last year.
The fund also offers stability as its manager, Justin Thomson, has managed the fund since 1998. Moreover, investors only pay fees of 1.12% and can invest in the fund with as little as $2,500.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
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