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International Funds Mutual funds that invest internationally have become very popular recently. These funds allow investors to diversify beyond domestic investments, as well as access to markets that would be difficult for an individual to enter on his own. While they allow for greater diversification as well as the opportunity for high returns, international funds do have added risks and drawbacks. Many of the funds invest in emerging markets, which tend to be more volatile than US markets. International funds are also affected significantly by exchange rates. If the fund is invested in a security in a country and that country's currency falls by 10% relative to the US dollar, the investor loses 10% of his money - even if the stock price stays the same. In addition to all this, foreign funds may be subject to foreign taxes on investment gains, and usually have higher fees than domestic funds. Despite all their drawbacks, many professionals recommend investing a small portion of your portfolio internationally. There are four basic types of international funds: International Funds Also known as overseas funds diversify investments throughout other countries. They manage risk by investing in both mature, stable countries, as well as fast growing emerging economies. Global Funds Global funds invest in the US as well as foreign countries. Managers adjust their exposure to different areas of the world depending on how they think the areas will perform. Regional Funds These funds concentrate on a particular part of the global economy, such as Latin America or South Asia. Country Funds These funds allow investors to concentrate on a particular country's economy. These funds are generally closed-end, carry high risk, and are not recommended for novice investors.

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