According to Lipper’s latest fund flow report, stock funds investing globally registered strong inflows in 2017. In contrast, domestic equity funds registered outflows during the same period. Investors increasingly shifted their focus from domestic equity funds to global equity funds in 2017 and will keep a close watch on international funds this year.
Moreover, recently released economic data indicates that the world’s major economies, including China and the Eurozone, are gathering pace. Given that these are engines for the global economy, this is a positive development. Global mutual funds are excellent options for those looking to widen exposure across countries in 2018.
Investors Switch to Global Funds
As per Lipper’s fund flow report released on Jan 3, 2018, domestic equity-based funds witnessed estimated outflows of $23.4 billion in 2017. In contrast to domestic funds, their global counterparts registered inflows of $165 billion during the same period. Further, equity fund flows were mixed. Total inflows in international equity funds reached $1.318 billion while domestic equity funds posted outflows of $532 million.
As per the latest ICI weekly fund flow report, fund investors ended 2017 just as they had started the year. For the week ended Dec 27, stock funds managed to attract $4.1 billion, with around 70% of the amount being invested in global stock funds, which registered inflows for 56 consecutive weeks.
Why Buy Global Equity Funds?
If selected carefully, global mutual funds have the potential to offer secure and attractive investment opportunities. Following, a steady decline in inflows in U.S. equity funds, investors might consider a globe approach for their portfolio.
Global stocks gained recently after business activity in China and the Eurozone picked up in the last month of 2017. China's Caixin China General Services Business Activity advanced from 51.9 in November to 53.9 in December, reaching its highest level since August 2014. Additionally, the Caixin Composite Output Index rose from 51.6 in November to 53.00 in December, indicating the fastest growth in a year. Also, the Final Caixin/Markit manufacturing PMI for December was 51.5, reaching a four-month high.
Moreover, per IHS Markit’s survey data, Purchasing Managers’ index, which measures the business activity of Eurozone, increased from 57.5 in November to 58.1 in December, settling at its best level since February 2011. Business activity in Eurozone has now increased for 54 straight months.
Additionally, IHS Markit’s chief business economist Chris Williamson said “manufacturing” sector registered its best growth ever and “service sector” registered its best yearly performance since 2007. Williamson added that following these figures the Eurozone increased by 0.8% during the last quarter of 2017 the GDP.
Buy These 5 Global Equity Funds
Strong inflows in global stock funds in 2017 and an encouraging economic backdropin world’s major economies like China and the Eurozone makes global equity funds strong investments in 2018. According to Morningstar, the world large stock mutual fund category posted three months and one-year returns of 7.1% and 24.6%, respectively.
This encouraging backdrop calls for investors’ attention to five global equity mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have impressive returns in the last one year. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Vanguard Global Equity Investor (VHGEX - Free Report) uses bottom-up stock analysis to invest a large share of its assets in equities of companies all over the globe. It invests in both growth and value companies irrespective of their market capitalization. The fund also diversifies its allocation across different industries.
VHGEX has an annual expense ratio of 0.48%, which is below the category average of 1.17%. The fund has returned 29.4% in one year.
American Century Global Growth Investor (TWGGX - Free Report) seeks growth of capital. TWGGX invests mainly in those companies that are based in developed countries including the United States. The fund focuses on investing in securities of companies, whose earnings and revenues are increasing at a significant pace.
TWGGX has an annual expense ratio of 1.08%, which is below the category average of 1.17%. The fund has returned 28.4% in a year.
T. Rowe Price Global Growth Stock (RPGEX - Free Report) seeks capital appreciation for the long run by investing primarily in large-cap global companies. RPGEX invests in more than five countries, including the United States. The fund will also invest more than 40% of its assets in stocks of large-cap companies that are based outside the United States.
RPGEX has an annual expense ratio of 1.01%, which is below the category average of 1.17%. The fund has returned 36.1% in the last 12 months.
American Funds Global Growth Portfolio A (PGGAX - Free Report) invests in a variety of American Funds in different weightings and combinations, of which majority are growth funds. The fund will invest more than one-fourth of its assets in underlying funds that invest more than 40% of assets in foreign companies. PGGAX seeks capital growth for the long run.
PGGAX has an annual expense ratio of 0.81%, which is below the category average of 1.17%. The fund has returned 29.8% in one year.
Fidelity Worldwide (FWWFX - Free Report) invests in securities, including common stocks, issued by companies based in different countries all over the world. FWWFX measures the industry position and financial condition, and economic and market conditions of each of the companies before investing. The fund seeks capital growth.
FWWFX has an annual expense ratio of 0.80%, which is below the category average of 1.17%. It has returned 32% in one year.
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