3 Best Ways to Dip Into International Stock Markets Now

Advertisement

If you have an aversion to international stock markets and the mutual funds that invest in foreign stocks, you’re not alone. Investors like to stay close to home, because if nothing else, U.S. stocks provide a wealth of options for just about every kind of investing flavor.

3 Best Ways to Dip Into International Stock Markets NowBut is that really a smart investment strategy … especially right now?

Although mutual funds invested in international stock markets typically carry higher expenses, greater geopolitical risk and more currency risk than domestic stock funds, there’s still plenty of reason to have some global exposure now, and in the future.

For example, for the most part of 2015, the rising U.S. dollar has been a big factor in putting downward pressure on American firms with significant overseas operations, as well as elevating prices of international stocks. Sure, the S&P 500 index is up about 4% year-to-date and sitting at all-time highs, but the MSCI EAFE index of developed countries is up more than 11% in 2015. Emerging markets as a whole are also handily beating U.S. stocks this year.

The short-term outperformance of international stock markets is likely to continue, but that doesn’t mean investors should be any less selective about how they get their overseas exposure.

With that in mind, we’ll look at three of the best international stock mutual funds to buy today.

Best International Stock Funds: Vanguard European Stock Index (VEURX)

Best International Stock Funds: Vanguard European Stock Index (VEURX)Load Fee: None
Expenses: 0.26%, or $26 annually for every $10,000 invested
Minimum Initial Investment: $3,000

The European economy as a whole appears to be in recovery mode, and Vanguard European Stock Index (MUTF:VEURX) may be the best fund to take advantage of growth potential there.

The European Central Bank’s quantitative easing program will support that potential, and should play a factor in keeping the euro low compared to the U.S. dollar in the short term — another driver of European stocks.

VEURX is an outstanding fund for investing in Europe because it is well-diversified and cheap. With over 500 holdings, and by tracking the FTSE Developed Europe Index, investors can capture nearly the entire European stock market, including big, dependable holdings such as Nestle (OTCMKTS:NSRGY), Novartis AG (ADR) (NYSE:NVS) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A, NYSE:RDS.B).

Although performance will rarely find VEURX near the top ranks of Europe stock funds, its passive index approach allows for reliable long-term returns and the lowest expense ratio (0.26%) in the Europe stock category.

Read more about VEURX on Vanguard’s website.

Best International Stock Funds: Oakmark Global Select (OAKWX)

oakmarkLoad Fee: None
Expenses: 1.13%
Minimum Initial Investment: $1,000

If you’re looking for an outstanding actively managed fund with long and deep management experience — and a track record that reflects it — Oakmark Global Select (MUTF:OAKWX) is a solid choice.

Managers David Herro and William C. Nygren have been at the helm of OAKWX since 2006, which provides a good window into past performance. Herro is also a manager of another stellar international stock fund, Oakmark International (MUTF:OAKIX), though OAKIX is closed to new investors. Meanwhile, Nygren manages a few other Oakmark funds, including Oakmark Select (MUTF:OAKLX).

It is important to note that OAKWX is a world stock fund, which means that this is a truly international play — it’s invested in the whole globe, including the U.S. Recently, the allocation to U.S. stocks was 54%, with the remainder of the portfolio allocated to international holdings such as Switzerland’s Credit Suisse Group AG (ADR) (NYSE:CS) and TE Connectivity Ltd (NYSE:TEL), as well as the U.K.’s CNH Industrial NV (NYSE:CNHI).

While no fund is assured of category-busting returns in steep market declines, OAKWX can be a great international holding in a long-term portfolio. The five-year annualized return of 14% for OAKWX places the fund ahead of 85% of other funds in the foreign large blend category.

Read more about OAKWX on Oakmark’s website.

Best International Stock Funds: Oppenheimer International Small Company Fund (OSMAX)

Best International Stock Funds: Oppenheimer International Small Company Fund (OSMAX)Load Fee: 5.75% (front-end)
Expenses: 1.19%
Minimum Initial Investment: $1,000

If you want to go more aggressive with international stock markets by concentrating on small- and mid-cap stocks, try Oppenheimer International Small Company Fund (MUTF:OSMAX) on for size.

Sure, when you combine international investing with smaller-cap investing, you take on more risk. But a well-managed fund will offer commensurate returns.

And OSMAX is a well-managed fund.

Investors still will need the patience and discipline to hold on through steep declines, but the fund’s long-term returns are nearly impossible to beat. For example, OSMAX took a deep dive of 66% during the worst of the financial crisis of 2008-09, but it blew away the category averages in 2009 with a 122% jump. And the 10- and 15-year performance ranks are as good as it gets, with OSMAX performing among the top 1% of all foreign small- and mid-cap growth funds.

A small caveat: The fund’s current manager has been at the helm for just three years … of course, looking at the three-year rank places OSMAX comfortably ahead of 95% of its category peers, so there’s not too much to worry about here.

No, the important downside to keep in mind here is that Small Company charges a front-end load fee of 5.75%, which certainly is a lot to swallow at the start. Still, given the fund’s long-term performance, it’s hard to argue that the fee isn’t worth it.

Read more about OSMAX on Oppenheimer’s website.

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His top holding is his privately held investment advisory firm. Under no circumstances does this information represent a recommendation to buy or sell securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/05/international-stock-markets-mutual-funds-veurx-oakwx-osmax/.

©2024 InvestorPlace Media, LLC