Still, international mutual funds are not all alike. Some invest in single foreign markets, others invest in regions and others invest all over the world. Some try to hedge away currency risk, while others embrace it. Then, too, some funds take a top-down approach to stock picking, choosing the countries first and the specific stocks second, while others pick the stocks of companies they like no matter the country the company is based in. By and large, these differences are clearly delineated in each fund's prospectus, a detailed legal document provided to investors that spells out the fund's risks, strategies, fees and historical returns.
Savvy investors analyze whether a fund's investment strategy meshes nicely with their own.
Consider, for example, whether you want your fund to bank on one country's economic strength or if you'd prefer a fund that has a broader reach. Another option is so-called global funds, which differ from international funds in that they have the flexibility to invest a substantial portion of their assets in U.S. markets when fund managers think that's where the best opportunities lie. International funds, on the other hand, are generally required to invest the bulk of their assets overseas. Their shares, which trade on major exchanges, can sell at a discount or premium to the true value of the underlying portfolio. After you decide which type of fund is best for you, the only question is how much money you want to invest overseas.