investing

Do Global Funds Have a Place in Your Portfolio?

A global fund provides exposure to U.S. and foreign stocks, including shares of companies in emerging markets.

Question: Over the years, we have developed a diversified portfolio of stock, bond and money market funds, including domestic and international stock funds as well as some global stock funds. Do global stock funds have a particular place in a diversified portfolio? I'm thinking of liquidating them and investing the money elsewhere.

Answer: Think of global stock funds as all-in-one stock portfolios because they hold both U.S. and international stocks, including shares in emerging-markets companies. These funds typically hold roughly 50% of assets in U.S. stocks and 50% in foreign stocks in developed and emerging-markets countries.

To decide whether you should ditch your global stock funds, answer a few questions. First, do the funds’ allocation to U.S. and international stocks fit with your overall allocation plan? A moderate-risk portfolio for a 45-to-50-year-old investor with roughly two decades to go before retirement should devote more than 50% to U.S. stocks, as much as 30% to foreign stocks and a little less than 20% to bonds and cash.

If you find it difficult to figure out the overall allocation of your portfolio, check out Personal Capital. Once you sign up for a free account and link your investing accounts, the site will calculate your allocation. You can see a single aggregate view of all of your accounts by asset class, stock sector or even individual holdings. You may find your portfolio needs some realignment to get back on track with your target allocation, which could mean you’ll need to unload some shares in your global stock funds, as well as other funds.

But let’s assume the global stock funds work with your target allocation. The next question is, are they good funds? Some global stock funds are standouts, including Vanguard Global Minimum Volatility (VMVFX). If the funds you hold are poor performers, you should feel free to sell them in exchange for a better option. Just be aware of the tax consequences if your fund is in a taxable account, and be sure you have a worthy alternative in mind that fits with your overall investment plan.

Even if your global stock funds are solid performers, do you have your eye on another investment opportunity that you find more attractive? In that case, you could sell some or all of your shares in the global stock funds to free up cash, especially if they have posted strong returns in recent years and you’re taking profits off the proverbial table. Always go back to your investment plan, however, and make sure any moves you make stay in line with your target allocation.

Most Popular

Dying Careers You May Want to Steer Clear Of
careers

Dying Careers You May Want to Steer Clear Of

It’s tough to change, but your job could depend on it. Be flexible in your career goals – and talk with your kids about their own aspirations, because…
September 13, 2021
5 Top Dividend Aristocrats to Beef Up Your Portfolio
dividend stocks

5 Top Dividend Aristocrats to Beef Up Your Portfolio

The 65-member Dividend Aristocrats are among the market's best sources of reliable, predictable income. But these five stand out as truly elite.
September 14, 2021
7 Best Commodity Stocks to Play the Coming Boom
commodities

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021

Recommended

ETFs and Mutual Funds with Todd Rosenbluth
Index Funds

ETFs and Mutual Funds with Todd Rosenbluth

Which is better: ETFs or mutual funds? And how do you decide where to put your investments? CFRA fund expert Todd Rosenbluth has some answers. Also, h…
September 22, 2021
These 2 Emotional Biases Could Kill Your Retirement
Investor Psychology

These 2 Emotional Biases Could Kill Your Retirement

Are your emotions sabotaging your retirement plans? Some basic knowledge and careful introspection can go a long way toward avoiding major pitfalls.
September 20, 2021
Investment Strategies for the 4 Stages of the Economic Cycle
Markets

Investment Strategies for the 4 Stages of the Economic Cycle

The U.S. economy is cyclical in nature, surging ahead and pulling back in waves over time. Investors’ portfolios need to change with the rise and the …
September 19, 2021
Is a Target Date Fund Right for You?
investing

Is a Target Date Fund Right for You?

You're busy, and poring over investments is a pain. Wouldn't a target date fund be easier? Take a look at their pros and cons to see if incorporating …
September 14, 2021