International Equity Funds – An Overview

Equity funds is a term which is commonly misunderstood and therefore, it’s generally not realised that it is good to have an equity fund as well as how it can boost your investment returns.

Equity means stock, so it’s referring to a portion of a company’s shares that can be either sold or purchased by anyone. There’s a majority of mutual funds that have a portion of equities, they are riskier, but in almost every case, they do offer higher investment returns than bonds.

International equity funds mean a share of shares for international companies. The international market offers investment opportunities for companies all around the world and even though more than half of the global market is seized by US companies, there are good investment prospects if we turn our attention to other countries.

Therefore investing in international brands can represent the most beneficial move you can make with your investing money.

Remember that the idea is not to allow your investment to be too risky, therefore having international stocks represent a secure, low-risk move for your portfolio. Markets do fluctuate and for instance, right now, the international market that is doing better than the rest is the US market.

Typically, you can invest in two types of international markets: investments in developed countries and emerging markets. The first one is about markets, countries and industries fully developed and the second one deals with regions with less developed economies but with great potential. Investing in an emerging market can represent a risk as they are not as regulated as the others, but they do entail larger and substantial returns.

People usually invest safely in fully developed countries like Japan or Germany. Investment plans offered by financial institutions usually don’t include international companies, but if you see one, try not to compromise more than 5% of your entire portfolio.

Common risks surrounding international equities:

Political issues:

Since we are talking about countries and markets that are “not fully developed” it can entail that the country may be going through political turmoils that affect government stability and it can have a strong neative impact on the markets and industries there.

A little briefing on local governments background and history before investing in highly recommended to lower risk even more.

Currency risk:

Keep in mind the value of our currency compared to the value of the currency in which the market develops. Keep in mind that the lower our currency is compared to the local one, your chances of having stronger returns are higher.

However, this does mean that you’ve got to keep track of other stocks between the currencies to ensure you’re investments are providing a positive return.

Liquidity:

Liquidity can be a problem depending on how fast you want to start seeing returns. A liquid stock market means that there’s a constant selling/buying of stocks every day. So if you wish to sell stocks, chances are that there’s always a buyer or a seller depending on your needs.

Now think of a scenario where you´re looking to sell a share of shares and there’s no one willing to buy? That’s called illiquidity and has a negative impact and the real estate market – for instance – can be affected by this. Good examples of current international markets with almost zero liquidity issues are both the Chinese and the US market.

These are the most common struggles investors can face when looking at foreign markets and international equity funds. On the other hand, they do represent a truly diverse portfolio which is appealing for higher returns. Remember that the risk is higher, so try to invest no more than 5 to 10% of the portfolio on international equities.

Another option is to use money that is not in a budget or money that comes to you unexpectedly, to invest in this higher risk transactions. Some people have used money from unclaimed PPI policies towards international equity.  

Right now the government is forcing banks to give the money back, so you may as well check if you were one of the thousands of people who paid an unnecessary insurance policy for many years without knowing. Find out here if there´s investment money for you to claim and boost your investment returns.