LOS ANGELES (MarketWatch) -- Investors who want to cover the globe often end up with a portfolio that looks like the United Nations -- a general assembly of mutual funds.
That's not a bad strategy for experienced investors who are capable of dealing with the complexity of multiple prospectuses, proxies and quarterly statements. But for newcomers or less-savvy savers, such an approach can be overwhelming.
Enter the global or world fund, an investment vehicle that gives you exposure to the whole world via a single fund investing in both U.S. and international stocks.
Such a fund can be just the ticket for savers starting out in the work force or for parents setting up IRAs for their children, folks who may have just $1,000 or $2,000 to initially invest and who will be adding a limited quarterly or monthly sum after that.
Elliot Herman, partner in charge of wealth management at PRW Associates, in Quincy, Mass., employs this strategy for younger investors, or those who want to keep their investments simple initially. He argues that the one-stop funds he recommends often hold their own against a larger portfolio.
"These are proven strategies that over the years have done well or better than a diversified portfolio," he said. Two he likes are American Funds' Capital Income
Builder (CAIBX:58.37, -0.98, -1.6%) and Capital World Growth and Income
(CWGIX:41.36, -1.03, -2.4%) . Both carry initial sales charges, or loads, and require a $250 minimum investment.
"You have a team in American Funds that is made up of experts in both the international world and the domestic world, supported by a number of analysts who cover these funds," Herman said.
"These are proven strategies that over the years have done well or better than a diversified portfolio," he said. Two he likes are American Funds' Capital Income
Builder (CAIBX:58.37, -0.98, -1.6%) and Capital World Growth and Income
(CWGIX:41.36, -1.03, -2.4%) . Both carry initial sales charges, or loads, and require a $250 minimum investment.
The growth-and-income fund, which has an annual average return over the last 10 years of 13%, invests around 72% overseas. The less adventuresome Income Builder fund puts just 39% in non-U.S. stocks and has returned 11% annually over the last decade.
"You have a team in American Funds that is made up of experts in both the international world and the domestic world, supported by a number of analysts who cover these funds," Herman said.
A bigger world
A few years ago few in the U.S. would have considered global funds as a one-stop investment solution, said Kai Wiecking, a Morningstar fund analyst. "It's good we've made that much progress to recognize that foreign equities belong in everyone's portfolio," he said.
The global funds allow even investors without much cash to have a stake in evolving world markets. While the U.S. currently commands the lion's share of the market capitalization in stocks worldwide, Wiecking and others assert that situation is likely to change as Asia continues to emerge as a market powerhouse.
Wiecking's favorite world funds include American Funds' New Perspective (ANWPX:31.71, -0.78, -2.4%) , for its experienced management and highly diversified offerings, and Oppenheimer Global (OPPAX:65.33, -1.78, -2.6%) , which zeroes in on themes of new technologies, mass affluence and the aging population. Both carry a load or initial sales fee.
Among the no-load funds, he likes Oakmark Global (OAKGX: 22.16, -0.58, -2.5%) , which offers small-cap and midcap stocks, unlike most global rivals that stick to better-known large-cap stocks, and T. Rowe Price Global Stock (PRGSX:23.07, -0.72, -3.0%) .
Adam Bold, founder and chief investment officer of The Mutual Fund Store, headquartered in Overland Park, Kan., advises investors who want to use just one global fund to seek those that have matched or outperformed their peers.
He also likes the Oakmark fund, but makes a couple of other no-load recommendations as well: Polaris Global Value (PGVFX:16.79, -0.29, -1.7%) , which has beaten the S&P Index (SPX:1,330.63, -37.05, -2.7%) year-to-date and in one-year and five-year periods; and Julius Baer Global Equity
(BJGQX:40.68, -0.96, -2.3%) , a newer fund headed by the team of Rudolph-Riad Younes and Brett Gallagher, who have already proven their mettle on the now-closed Julius Baer International Equity (BJBIX:40.39, -0.71, -1.7%) .
Bold says most people need between seven and 12 funds to achieve diversity, including "large-cap growth, large-cap value, small-cap growth and value, international, bonds of some sort and a couple of sector funds."
"For the person who doesn't do that, wants to get something and have exposure to both, these funds make sense if you have the reality that mutual funds are not buy and forget investments," he said, noting that even one fund should get a once-over twice a year, either by the investor or an adviser.
Phillips Ruben, president of Boston-based Vision Financial Planning, makes use of Dimensional Fund Advisor funds as one-stop solutions for those investing only a small amount initially, but notes they're available only through a financial adviser. "They offer very broad diversification, are very tax efficient and very cost effective," he said
He likes DFA Global 60/40 Portfolio (DGSIX: 12.28, -0.19, -1.5%) , which is a mix of fixed income and global equity, and DFA Global Equity Portfolio (DGEIX:13.73, -0.36, -2.6%) , which is a more aggressive portfolio investing only in stocks. The latter, he said, would suit a younger investor with a much longer time horizon.
Going with just a single fund to start out, Ruben said, can prevent rash decisions, such as following trends in a particular fund or sector.
"I think a lot of people don't have the expertise to make the decisions to put together an effective diversified portfolio and this takes that decision-making piece out of it and puts it in the hands of the experts."
| Five global funds to consider | ||||
| Name of fund | Ticker | Expense ratio, load | 3-year return (annualized) | 5-year return (annualized) |
| Capital World Growth & Income | CWGIX | 0.77%, 5.75%, | 22.5% | 10.3% |
| Oppenheimer Global | OPPAX | 1.15%, 5.75% | 21.1% | 4.6% |
| Oakmark Global | OAKGX | 1.26%, no load | 24.6% | 18.6% |
| Polaris Global Value | PGVFX | 1.48%, no load | 25.4% | 16.3% |
| T. Rowe Price Global Stock | PRGSX | 1.2%, no load | 19.4% | 2.6% |
Source: Comstock
