Investing in Foreign Mutual Funds: A Guide for US Investors

A foreign mutual fund might look like an attractive option to U.S. investors. Countries that have a stable economic climate can be a hedging incentive. You can invest in a foreign mutual fund to hedge against inflation, but there are a few things you should know.

Restrictions

You cannot invest in a mutual fund that is based in a country at war with the United States. In 2010, those countries are Iraq or Afghanistan. Your money could be used to aid an enemy nation, which is illegal.

When to Use Caution

You should always take care to understand the governmental structure of a foreign nation before you invest in a foreign mutual fund. In Asia and South America, for example, governments have occasionally taken over oil companies. If a foreign government were to seize a mutual fund that you've invested in, you will never see that money again.

Safe Investments

There is risk involved with any investment. Carefully research  the mutual fund before you invest and be sure that you understand the risks of the particular foreign mutual fund. Also, keep in mind that some American mutual funds invest assets in foreign mutual funds. Investing in these types of funds can be a good alternative to investment strategies.