A stock fund is powerful because it pools the money of many investors, who can therefore afford to buy many more shares in various companies than an individual could. Investing in an international stock fund means that you give money to the stock fund company and they invest it for you. You in turn become a shareholder in the stock fund company.
Stock funds, like other mutual funds, are managed by a professional investment manager, who makes the decisions about which stocks to buy and which companies to invest in. When you invest with a stock fund, you are trusting the manager's judgment to make good choices about the companies he or she buys stock in. You trust the manager to choose companies that do well and therefore make you a profit. One goal of a stock fund manager is always to try to invest in stocks that have a low market price but a high profit potential. Fund managers share the interests of the investors because their salary is proportional to how well the fund performs.
Anyone who is interested in making a long-term investment might want to invest in an international stock fund. But why choose an international stock fund as opposed to a domestic one? The answer is that the best investment possibilities are usually scattered around the world. The managers of international stock funds are able to buy stock in companies offering the best investment opportunities, regardless of where they're located. And in recent years, investments in foreign stocks have produced 2 to 13 percent more returns than investments in U.S. stocks [source: Morningstar].
International stock funds make it easy for individuals to invest in foreign companies; the stock fund acts as a go-between. International investments are more complicated than ones within the United States because they involve different economies, currencies and investment laws and regulations. Without the expertise of the international stock fund investment managers, many people would not be informed enough to make good decisions about where to invest their money overseas.
Not all international stock funds are the same, however. Read on to learn about the different types.