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Fund Spy

A Checklist for Foreign-Stock Fund Investors

Five considerations when globalizing a portfolio.

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Foreign-stock funds have been as popular as the Monday-morning quarterbacking of Super Bowl XLIX. According to Morningstar's fund-flows report, international-equity funds, as a group, took in twice as many new dollars as U.S. equity funds in 2014. These flows weren't the result of chasing performance: Seven of Morningstar's nine international-equity categories posted negative returns in 2014.

What's the attraction? "These funds had double-digit returns in 2012 and 2013, so they were still pretty good going into the year," says Morningstar director of manager research Russ Kinnel. "In addition, a lot of news coverage has been devoted to the economic problems in the U.S., so people tend to think the grass is greener on the other side." In fact, despite recent pessimism about China's growth, European debt, and political instability in the Ukraine and elsewhere, many readers on Morningstar.com say they're either holding tight to their foreign-stock holdings or adding to them on weakness.

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Susan Dziubinski has a position in the following securities mentioned above: VWIGX. Find out about Morningstar’s editorial policies.