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Many U.S. investors never invest beyond the borders of their home nation, feeling more comfortable with the domestic companies with which they're most familiar. Yet investing internationally can not only be equally lucrative as investing in U.S. stocks but also add valuable geographical diversification. Although international index funds offer low-cost investing options, many investors feel more comfortable with professional management for their overseas investments. Accordingly, below we look at three international mutual funds with solid track records of success.
Data source: Fund companies.
Fidelity International Capital Appreciation
The International Capital Appreciation Fund is a no-load managed mutual fund from industry giant Fidelity. The fund aims to find long-term growth of capital by investing in growth stocks in a variety of international markets, including both emerging markets and developed-economy markets. More than three-quarters of the fund's assets are invested outside the U.S., with Europe, emerging markets, and Japan representing the three most important regions for investment other than within the U.S. stock market.
Recently, Fidelity International Capital Appreciation has put together an impressive run of strong performance. Over the past five years, the fund has produced more than 10% in average annual total returns, finishing in the top 2% of all funds in its category. Over the long run, Fidelity is in the top fifth of its fund universe with 15-year average annual returns in excess of 7%. That tops its benchmark by a full percentage point, and it reflects solid stock-picking prowess that its managers have achieved for years.
Mondrian International Equity
On the other side of the style-box spectrum, Mondrian International Equity casts itself as a large-cap value international mutual fund. The company has below-average expenses, no load, and relatively low turnover compared to most of its peers, and it also sports a more attractive level of income for shareholders than Fidelity's more growth-oriented fund. The current trailing distribution yield amounts to 2.6%, which is better than index investors can expect to receive.
The Mondrian fund's long-term performance has been quite impressive, even though it hasn't particularly distinguished itself in any one year. Over the past 15 years, the fund has produced average annual returns of 6.43%, which is well above the category average of just over 5%. That puts the fund in the top 15% of its peers, and the fund's focus on Europe and Japan makes it a good choice for those who don't necessarily want the riskier exposure to emerging markets that other international funds have.
DFA International Small Company
For those investors who like to round out their portfolios with shares of small companies, the DFA International Small Company fund is a reasonable choice. The fund has all but about 2% of its assets in medium-sized and smaller companies, and it follows a blended focus that rounds out the larger-company exposure that most international mutual funds have. DFA has a decidedly developed economy focus, with just 1% of assets invested in emerging market stocks.
Small-cap stocks have done better than large caps in the international investing universe, and the DFA fund in particular has done a lot to deserve its solid reputation. Its 15-year average annual return of 10.5% is impressive, and even though it only puts the fund in the top third of its category, the DFA fund nevertheless has found ways to outperform its related index in seven out of the past eight more recent quarters.
Investors can find hundreds of different international mutual funds to choose from, and many investors use mutual funds to place bets on broader segments of the stock market. With good track records of returns, these three funds are a good place for international investors to start in order to think about setting up their portfolios in a balanced and diversified manner.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.