How do global equity funds work?

Here’s everything you need to know about global equity funds, including how they work, the risks involved and whether they are a good investment.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A retired couple review their investing portfolio

Image source: Getty Images

Having a good understanding of the different types of investment products that exist is quite useful for investors. With sufficient knowledge, it becomes easier to pick investments that fit your goals or preferences. For example, you might have heard of global equity funds, which are a popular type of investment.

Let’s take a look at how they work.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

What is a global equity fund?

It’s a kind of investment fund that invests in the stock of companies based anywhere in the world, including the investor’s home country.

The fund aims to identify the best possible companies and stocks around the world and invest in them. So as an investor, this fund can help you take advantage of the opportunities that the global economy presents. 

A global equity fund is usually actively managed. This means it has a manager who tracks its performance and makes buy, hold and sell decisions. However some of these funds may be passively managed, so check before you invest.

Are they a good investment?

Investing in a global equity fund can provide investors with a chance to diversify their portfolios on multiple layers, including geographical, sector and country layers. This reduces the possibility of the performance of one stock or the economic and political situation of one country negatively affecting the performance of the whole portfolio.

For beginners who are just getting into investing, this a particularly good risk mitigation strategy.

A global equity fund could also increase the potential returns for investors.

For example, the fund might invest in the stocks of companies in emerging markets whose prices are expected to appreciate as their local economies grow or improve. This might translate to greater returns for investors in the long term as opposed to strictly investing in the stock of domestic companies.

What are the risks?

Though global equity funds may be good for diversifying your portfolio and can increase your potential returns, they are not without risks.

In addition to the risk that comes with investing in stocks in general, investors in these funds face two other major risks:

  1. Currency risk: The exchange rate between a particular country’s currency and sterling often fluctuates. This can affect the sterling value of an investment. For example, a strong pound will translate to lower foreign stock value when the stock is converted to sterling.
  2. Country risk: This risk comes from focusing too much of the fund’s assets in a particular country. Such an approach increases the fund’s exposure to that country’s currency fluctuations, political risks and economic risks. These can all hurt the fund.

What are the most popular global equity funds?

There is no shortage of global equity funds for UK investors looking to diversify their portfolio. Among the most popular are:

  • Fundsmith Equity
  • Lindsell Train Equity
  • Blue Whale Growth
  • Baillie Gifford Global Discovery
  • Troy Trojan Global Equity

How can I invest in a global equity fund?

If you’re interested in global equity funds, then investing in one is quite simple with a share dealing account. If you don’t already have one, then check out top picks for the best share dealing accounts. You’ll find most of the popular global equity funds there. But as with any other kind of investment, don’t forget to do your research first when choosing a fund.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »