What Is a World Fund?
Let me explain to you what a world fund is—it's a type of mutual fund or other investment company that puts money into securities traded in several different countries, including the United States. You might hear it called a global fund sometimes, but don't mix that up with the Global Fund, which is an international organization focused on combating diseases like AIDS, malaria, and tuberculosis.
Key Takeaways
As I see it, the core of a world fund is that it's a mutual fund or investment company investing in securities from various countries, including the US. The way these funds are structured gives you several key benefits, with the main one being that it caps your exposure to any one country. When you diversify your portfolio this way, you and the fund can cut down on the chance of big losses, because sharp drops in one area often get balanced by rises elsewhere.
How a World Fund Works
World funds usually put a big chunk of their money into US-listed securities, but they also spread it out to securities from other countries. This setup provides real advantages, starting with limiting your ties to any single country. By spreading investments around, these funds help you avoid major hits, as ups and downs in one region can be countered by positives in others, leading to more overall stability, less volatility, and lower risk. Your returns aren't hanging on just one economy or market.
On top of that, this approach cuts down on exchange rate risks—the kind tied to economic shifts that affect currency values between countries. Some experts say country diversification isn't as useful anymore because of globalization, but others push back on that view.
World Funds vs. International Funds vs. Country Funds
In the world of investment funds, terms related to geography can sound alike, but they mean specific things, so pay attention. Besides world funds, you have international funds and country funds.
The big difference between international funds and world funds is crucial—don't get them confused. For US investors, international funds stick to securities from outside the US, while world funds can put up to 75% of their money into US securities.
Country funds, on the other hand, are mutual funds that only invest in securities from one specific country, building a portfolio solely from that nation—sometimes called single country funds.
The main case for world funds is that, while they're rooted in the US market, they let managers pick the top securities from around the world, rather than being stuck with one country's options and potentially missing better opportunities.
Other articles for you
Marginal propensity to save (MPS) measures the portion of additional income that individuals save rather than spend.
Series I Bonds are U.S
An option class groups all call or put options for a specific underlying asset on an exchange.
UBTI is income from activities unrelated to a tax-exempt entity's exempt purpose, subject to taxation to ensure fair competition.
Middle market firms are essential businesses with revenues between $10 million and $1 billion that drive significant economic growth and job creation in the US.
The marginal rate of substitution (MRS) measures how much of one good a consumer is willing to give up for another while keeping the same level of satisfaction.
Enhanced Oil Recovery (EOR) is a method to extract remaining oil from wells after primary and secondary techniques by altering the oil's properties.
The utilities sector involves companies providing essential services like electricity, gas, and water, offering stable long-term investments with dividends amid regulatory and economic challenges.
This article explains what large-cap stocks are, their characteristics, and how to invest in them.
Bungalows are compact, single-story homes with distinctive features like low-pitched roofs and front porches, offering affordability and ease of maintenance but with some drawbacks like larger land use.