"Of Mutual Interest"- John Waggoner, Mutual Fund Columnist at "U.S.A. Today"
Tuesday, February 19, 2008SUZANNE PRATT: In tonight's "Of Mutual Interest," investing internationally without leaving home. Here's John Waggoner, mutual fund columnist at "U.S.A. Today."
JOHN WAGGONER, MUTUAL FUND COLUMNIST, USA TODAY: If you've been to Europe lately, you know that a cup of coffee costs about $8 and that's if you don't want anything extra, like a lid. You can thank the weak dollar for that. But there is a bright side. The dollar's fall has supercharged returns from international funds. And that's the problem. To get good returns from international funds, you need red-hot stock markets abroad and a falling dollar. That's an unusual combination.
If you want to invest internationally, but you don't want to play the currency market, consider buying a U.S. fund that invests in big, multinational stocks. The average large company foreign blend fund gained 13 percent last year, according to Morningstar, versus 5 percent for the Standard & Poor's 500 stock index. A big part of that return came from the falling dollar, however. For example, the French stock market gained just 0.2 percent last year. When converted to dollars, U.S. investors reaped an 11 percent gain.
You could argue, however, that the U.S. dollar has suffered enough, at least against the euro. Should the dollar rally, international funds will lag. So how do you catch a bit of global growth while minimizing currency risk? A simple answer would be to invest in a large company U.S. stock fund, which probably has big stakes in companies like Intel, Coca-Cola and ExxonMobil, all of which get significant revenue abroad. Many also own foreign stocks that are traded in the U.S., such as Nokia, the Finnish cell phone maker or Nestle, the Swiss chocolate maker. International funds are a good diversifier. But if you want to invest internationally without leaving home, large company stock funds are a good way, too. You might even earn enough for a double latte on your next trip to Europe. I'm John Waggoner.
