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The 3 Best Ways to Buy International Stocks

These are three of the best mutual funds on the market for investors looking to expand outside of the U.S.

By Kent Thune, InvestorPlace Contributor

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International stocks haven’t exactly received a lot of love lately, but being a segment of the market that is out of favor can present good buying opportunities. International stocks also still serve an important role in portfolio construction. So now can be a good time to pick up shares of the best mutual funds that invest overseas.

The 3 Best Ways to Buy International StocksI recently debated if international mutual funds are worth the risk because the returns for most of them have been generally much lower for at least a decade.

More specifically, the average international stock fund has returned less than domestic stocks, but at a higher market risk. But that was a generalized statement, and it doesn’t mean that all international stock funds aren’t worth buying.

To summarize the conclusion of that debate: Investors just need to dig a bit deeper to find the outstanding funds that invest overseas.

So in that spirit, here are three of the best mutual funds investing in international stocks.

Best Ways to Buy International Stocks: T. Rowe Price International Discovery Fund (PRIDX)

Best Ways to Buy International Stocks: T. Rowe Price International Discovery Fund (PRIDX)Expenses: 1.20%, or $120 annually per $10,000 invested
Minimum Initial Investment: $2,500

One of the best ways to get the most out of international stocks is with a fund like T. Rowe Price International Discovery Fund (MUTF:PRIDX), which invests outside of the large-cap box.

The PRIDX portfolio consists primarily of non-U.S. stocks, such as Abcam PLC (OTCMKTS:ABCZF), Fisher & Paykel Healthcare Corp (OTCMKTS:FSPKF), and Mercadolibre Inc (NASDAQ:MELI), that are small to medium in market capitalization.

As for performance, there’s no question that the small- and mid-cap international stocks have handily beaten large-cap international stocks for more than a decade. Even the average small- and mid-international stock fund beats the MSCI ACWI Ex USA index for the one-, three-, five-, ten- and 15-year returns.

Standing head and shoulders above the benchmark index and the category averages, PRIDX beats approximately 80% of its small/mid category peers in all of the aforementioned time periods.

Best Ways to Buy International Stocks: Fidelity International Capital Appreciation Fund (FIVFX)

Best Ways to Buy International Stocks: T. Rowe Price International Discovery Fund (PRIDX)Expenses: 1.13%
Minimum Initial Investment: $2,500

A good way to beat the major market indices for international stocks is to buy a well-managed mutual fund like Fidelity International Capital Appreciation Fund (MUTF:FIVFX).

As I mentioned previously in this story, large-cap international stocks have mostly lost to their small- and mid-cap cousins. But a good fund manager can invest in large-caps and still get index-beating performance.

Since taking the helm in the beginning of 2008, manager Sammy Simnegar has made FIVFX a solid international growth fund with a combination of boldness and confidence. Big bets in sectors, such as technology and financials, have paid off for the fund, while strategic moves into defensive sectors like consumer staples have protected shareholders from too much downside risk.

Although FIVFX invests up to 20% in U.S. stocks, the vast majority of the fund holds international stocks like Unilever plc (ADR) (NYSE:UL), British American Tobacco (OTCMKTS:BTAFF), and Tencent Holdings Ltd (OTCMKTS:TCTZF).

Best Ways to Buy International Stocks: Matthews China Dividend Investor (MCDFX)

Best Ways to Buy International Stocks: Matthews China Dividend Investor (MCDFX)Expenses: 1.19%
Minimum Initial Investment: $2,500

Another good way to buy international stocks is with mutual funds like Matthews China Dividend Investor (MUTF:MCDFX) that invest in one region that has strong potential for long-term growth.

Arguably, the best way to invest in China is with a mutual fund that buys and holds high-quality Chinese stocks. Instead of looking for the hottest short-term performers, investors are better served to use the Buffett-esque approach of holding big companies that pay dividends.

The value style of MCDFX pays off by avoiding the steepest declines of Chinese stocks, while taking advantage of long-term capital appreciation opportunities, as is evidenced by the fund’s five-year return of 7.3%, which beats 98% of China Region stock funds and trounces the measly 1% annualized return for the MSCI ACWI ex-USA index.

Recent holdings for MCDFX were China Mobile Ltd. (ADR) (NYSE:CHL), China Medical System Holdings (OTCMKTS:CHSYF), and Minth Group (OTCMKTS:MNTHF).

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/07/3-best-ways-buy-international-stocks-pridx-fivfx-mcdfx/.

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