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3 Must-Buy Non-US Mutual Funds to Diversify Your Portfolio

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Investors may find non-U.S. mutual funds more attractive than those having significant domestic exposure in the current backdrop of the Federal Reserve’s overnight interest rate hike, record-high inflation rates, and soaring crude oil prices. Moreover, the strengthening of the U.S. dollar due to Fed policy tightening has also put foreign mutual funds in a favorable position. Moreover, an indication of a possible recession has also created a negative impact on investor sentiment. In this environment, investing in non-U.S. mutual funds may prove profitable for investors.   

International Monetary Fund’s (IMF) World Economic Outlook report published in April 2022 has outlined the Russia-Ukraine war as the significant reason for the slowdown in global growth and high inflation. Real GDP is estimated to grow at 3.3% and 2.4% for advanced economies in 2022 and 2023. However, it is projected to increase at 3.8% and 4.4%, respectively, for Emerging Markets and developing economies during the said period. Thus, emerging countries like Israel, India and China are good alternative destinations for investors who wish to diversify their portfolios and earn a good return. IMF projected Israel’s economy to grow at 5.0% for 2022 and 3.5% for 2023, India at 8.2% and 6.9%, and China at 4.4% and 5.1%.

Israel invests the most in research and development in the world. It has an entrepreneurial-mind and skilled workforce, especially in the field of engineering and technology. India is among the fastest-growing counties in the world and home to the largest youth population in the world. The country offers abundant investment opportunities in different sectors like consumer goods, information technology, infrastructure and agriculture. The government of India has an accommodative policy for foreign investment. China is the most populated country in the world and gives tremendous growth opportunities for businesses; it has a highly skilled labor force and is the manufacturing base for major global brands. The Chinese government’s investment in infrastructure is unparallel.

Thus, investing in non-U.S. mutual funds primarily having companies as its major holdings that operate in the aforesaid countries may prove more profitable than funds investing in companies having significant domestic exposure.

We have thus selected three such non-U.S. mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Timothy Plan Israel Common Values Fund (TPAIX - Free Report) invests most of its assets in common stocks of companies that are headquartered or have a significant amount of business in Israel irrespective of their market capitalization through American Depositary Receipts (ADRs) and direct investments in such companies on foreign stock exchanges. TPAIX advisors invest in growth stocks that have above-average growth potential in revenue, earnings, cash flow, or other similar criteria.

Edward R. Allen has been the lead manager of TPAIX since Oct 12, 2011. The fund has 62.17% of its net assets invested in various companies in Israel as of 5/31/2022.

TPAIX’s three-year and five-year annualized returns are nearly 14.3% and 11.3%, respectively. TPAIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.72%,

To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Wasatch Emerging Markets Select Fund (WAESX - Free Report) invests most of its assets along with borrowings, if any, in equity securities of companies that have significant exposure in emerging market countries, irrespective of their market capitalization. WAESX advisors invest mostly in sectors like communication services, consumer discretionary, consumer staples, financials, health care, industrials, and information technology.

Ajay Krishnan has been the lead manager of WAESX since Dec 13, 2012. The fund has 31.66% of its net assets invested in various companies in India as of 5/31/2022.

WAESX’s three-year and five-year annualized returns are 13.3% and 9.1%, respectively. WAESX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.37%.

BNY Mellon Global Emerging Markets Fund (DGIEX - Free Report) invests most of its assets along with borrowings if any, in common stocks like equity, derivatives other strategic instruments with similar economic characteristics of companies their principal place of business, or headquartered, in emerging market countries. DGIEX advisors consider emerging market countries that are part of the Morgan Stanley Capital International Emerging Markets Index (MSCI EM Index).

Paul Birchenough has been the lead manager of DGIEX since Dec 10, 2020, the fund has 26.57% of its net assets invested in various companies in China as of 5/31/2022.

DGIEX’s three-year and five-year annualized returns are 12.4% and 6.5%, respectively. DGIEX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.99%.

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