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What's the difference between global and international equity mutual funds?

Global equity funds invest in countries around the world. International equity funds invest outside Canada and the United States.

Global equity funds   to be more precise, must hold at least 50% of their total assets and 75% of their non-cash assets in equities or equity equivalents of companies located in each of the three geographic regions of Asia, the Americas and Europe, or derivative-based exposure to these markets.

International equity funds   have a minimum of 50% of their total assets and 75% of non-cash assets in equities or equity equivalents of companies located outside Canada and the United States, or derivative-based exposure to such markets.

These allowable minimum and maximum percentage holdings are based on median average values calculated from fund holdings over a period of three years. The Investment Funds Standards Committee developed the definitions. The committee, made up of members of Canada's funds data publishing and analysis companies, was established in 1998 to create consistency in reporting mutual fund performance. You may want to consider having at least some foreign exposure in your mix. When combined with Canadian investments, foreign investments, over the long term, have reduced market volatility and also increased returns. The distinction between global and international equity funds is important if you invest in mutual funds. If you already have Canadian equity funds and U.S. equity funds, you could easily end up with more Canadian and especially U.S. exposure than you planned if you then bought a global equity fund. The reason? U.S. equities typically make up a substantial share of the investments held in a global equity fund since the American economy is the world's largest. If you instead added an international equity fund to your Canadian and U.S. equity funds, your diversification would be enhanced. Since you would be adding non-U.S. and non-Canadian holdings. If you are thinking of buying international, global or other mutual funds, take time to determine the actual holdings in these funds. A fund categorized as international equity might actually have some U.S. stock holdings. A global equity fund may have a larger than expected weighting in U.S. stocks. A fund is listed in the newspaper's monthly mutual fund tables as international equity or as global equity will not have holdings the same as the others included in that category. Check the details for the particular fund. You can find the fund's holdings, and the percentage breakdown by country, in the fund's annual report. Similar information is also available on the web at sites such as The Globe and Mail's www.globefund.com Consider getting professional advice. An investment or strategy that makes sense for one investor may not necessarily suit your needs.