According to Lipper, the average diversified U.S. stock mutual fund returned 2.5% in Q1, while international funds gained 4.5%. Meanwhile, Morningstar’s (MORN) data showed that US investors added $66.2 billion into foreign-focused mutual funds and ETFs in the first quarter. This was significantly up from inflows of $37.9 billion in the comparable year-ago quarter. According to the Investment Company Institute, investors owned about $2.7 trillion in foreign-focused funds as of Mar 31.
However, this does not negate the fact that U.S. was not a performer. There have been strong gains in certain US sectors too. Much like investors may opt for a balanced approach by selecting a mix of stocks, mutual funds and ETFs, investors should maintain a balanced stance by investing in Global mutual funds.
Over the years, studies have consistently shown that investing in both domestic equities and foreign stocks reduces portfolio risk while enhancing returns. In addition, the primacy of the US equity markets has greatly diminished with its share of global stock market capitalization declining. This is why investors can no longer limit themselves to domestic investments. By holding widely diversified portfolios, selected after careful research, global mutual funds offer a secure and attractive opportunity for investors.
Q1 Market Performance
Markets witnessed choppy trading sessions during Q1 2015 as investors grappled with concerns related to lower global growth projections, a slump in oil prices, strengthening dollar and apprehensions about the timing of the Fed interest rate hike. The World Bank reduced its global economic growth outlook for 2015 and 2016.
The Dow (DIA) snapped a three-quarter winning streak and declined 0.3%. However, the S&P 500 (SPY) gained 0.4% and extended its quarterly winning streak to nine quarters. The Nasdaq advanced 3.5%.
Key international markets on the other hand had strong gains in Q1. In China, the Shanghai Composite had hit its highest level in nearly seven years in late March. The tech-heavy ChiNext had also reached record level in Q1. Japan also has been seeing robust gains. The Nikkei 225 gained over 10% in the quarter and went on to hit a 15-year high. After a robust performance in 2014, Indian markets were somewhat calm and the benchmark S&P BSE Sensex gained only 1.6%.
