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How International Stock Funds Work


Indonesian President Susilo Bambang Yudhoyono (left) greets Nigerian President Olusegun Obasanjo as they meet to discuss the future of developing nations. The economic growth of those nations is one reason to invest in an international stock fund.
Indonesian President Susilo Bambang Yudhoyono (left) greets Nigerian President Olusegun Obasanjo as they meet to discuss the future of developing nations. The economic growth of those nations is one reason to invest in an international stock fund.
Enny Nuraheni/AFP/Getty Images

You're too familiar with the news: Another U.S. company is outsourcing its customer service to a company in India. It doesn't affect you personally, so you ignore it.

But hang on. That company in India just grew a lot. If you owned stock in that company, you'd just have gotten richer. How can you find investment opportunities halfway around the world?

Well, you could pack your bags and live as a nomad, sniffing out potential growth in the developing markets of the world. Or you could invest in an international stock fund. An international stock fund is a kind of mutual fund, a company that brings together the money of multiple investors. A stock fund uses this money for investing in stocks.

Stocks are shares in a company that individuals can purchase. For example, say someone owns a company worth $1,000,000. He decides to sell it, but only wants to sell part of it, so that he can still remain in control. So he divides the assets of the company into 100 equal pieces. He keeps half of the pieces for himself, but sells the rest at $10,000 each. He still manages the company, because he owns the majority of the assets, but he's now sharing his profits with the other shareholders. As long as the company makes a profit, each shareholder receives a dividend, a small portion of the profit, proportional to the amount of shares the investor owns.

Stock funds are mutual funds that invest in stocks. The stock fund company's goal is to attract investors who contribute money, which the stock fund then uses to buy stock. International stock funds are simply stock funds that invest in foreign and international businesses.

Read on to find out how international stock funds actually work, who should be interested and why they can be rewarding.