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There are four basic categories of international funds. These include world funds, foreign funds, emerging market funds and country-specific funds.
World Funds: These funds are considered to be the safest among all the international funds. This is because these funds are invested in various regions of the world. However, a major part of the investment goes into the US market. When stock markets in one region crash, it is not necessary that other regions will follow a similar pattern. As a result, investment lost in one region is gained in another.
Foreign Funds: These funds invest in assets that are mostly outside the US. Investment risk depends on the countries selected for investment. In this regard, European stock markets are considered to be fairly stable in comparison to highly volatile markets of Asia. Hence, a major part of foreign funds have their investment in European market with very little investment in the Asian markets.
Emerging Market Funds: In this, funds are mainly invested in markets that are on a path to development. These include investments in underdeveloped countries around the world. These are considered to be high-risk investments. The investment might suffer losses if any political disturbances or economic crash occurs in the country. At the same time, these funds have enormous growth potential if the markets continue an upward trend. Emerging market funds are ideal for those investors who are planning a long-term investment.
Country-specific Funds: In these, investments are primarily made in a specific country or region of choice. These are highly calculated type of investments due to the amount of risk they carry. Country-specific funds offer investors an advantage of knowing where they are investing and a concentrated way of managing funds. Country-specific funds are ideal for those investors who are sophisticated and well-versed with the nuances of global economy.
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