Global vs. International: What’s the Difference?

As of 2023, international stock markets accounted for approximately 40 percent of the world’s capitalization, offering a broad range of investment opportunities outside the U.S. borders¹.

For investors who are looking to diversify their mutual fund portfolio with exposure to companies located outside the U.S., there exist two basic choices: A global mutual fund or an international mutual fund.², ³

By definition, international funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks.

Make a Choice

The definition may seem straightforward, but what is less clear is why an investor might choose one over the other.

The reason an investor may select a global fund is to provide the portfolio manager with the latitude to move the fund’s investments among non-U.S. markets and the U.S. market, taking advantage of the shifts in relative opportunities these markets may present at any given moment.

By investing in a global fund, the investor faces the challenge of not knowing at any point in time their total exposure to the U.S. market within the context of their overall portfolio.

An Inside Look

As a consequence, some investors want to manage their allocation risk by setting the broad asset allocation for their portfolio and then identifying funds that are within those asset classes. For these investors, an international fund may be more suitable, as it allows them to maintain a greater adherence to their desired domestic or international stock allocation.

Keep in mind that asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

When considering a global or international fund, it is also important to be aware of the fund’s approach to managing inherent currency risks. Some funds opt to employ strategies that may mitigate the effects of currency fluctuations, while others view currency movements as an integral part of portfolio performance.

Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

1. Statista.com, 2024 ↩︎
2. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline. ↩︎
3. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. ↩︎