In the English language, "global" and "international" tend to be used interchangeably - hence the confusion in the investing world when we are told that global and international funds have completely different investment goals and provide investors with different kinds of investing opportunities.

Global funds consist of securities in all parts of the world, including the country in which you reside. Think of a globe, which displays every single country. Global funds are chosen primarily by investors who wish to diversify against country-specific risk without excluding their own country. Such investors may already have a lower than desired concentration of domestic investments or may not want to take on the high level of sovereign risk involved in making foreign investments.

International funds consist of securities from all countries except the investor's home country. These funds provide diversification outside of the investor's domestic investments. If an investor currently holds a portfolio consisting mainly of domestic investments, he or she may choose to diversify against country-specific risk and purchase an international fund. Alternatively, a speculator may invest in an international fund because he or she anticipates a rise in a particular foreign market.

For an introduction to mutual funds, check out this mutual fund basics tutorial.

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  3. Do mutual funds pay interest?

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  4. Why have mutual funds become so popular?

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  5. Do mutual funds pay dividends?

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  6. Can mutual funds invest in hedge funds?

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