Investing abroad

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6. Foreign unit and investment trusts

All major world markets and plenty of minor ones are covered by unit and investment trusts. These offer you the chance to buy a portfolio of, say, American or Indonesian shares via trusts here in the UK, without having to deal directly in the market concerned.

When you buy a trust, you are effectively hiring managers with expertise in the relevant market to do your investing for you. This saves you the chore of conducting detailed research into the underlying shares. However, you will still have to consider carefully

• whether the country concerned represents a good investment
• if there are several markets within that country (e.g. Japan or the US), which is the right one to invest in (e.g. small companies or blue-chips)
• if there are several trusts covering that country or those markets, which is the best-managed or best-positioned to make superior returns.

Many people spend far too much time trying to finesse their choice of particular fund managers. A vastly more important question is which country to invest in. Any strongly rising market will tend to produce good returns for trustholders. By comparison, the skill of the managers may have only a marginal effect on the final result.

The time when that skill really counts for something is during a stagnant or bear market, such as Japan since 1990. Good managers of Japanese funds have convincingly outperformed the market in the last decade. But the blunt truth is that investors would have done much better to stay out of that market altogether and buy into the US instead.

1. Why invest abroad? 2. Risk and reward in foreign investment 3. Custody risk 4. Currency risk 5. UK companies are foreigners too 6. Foreign unit and investment trusts 7. Picking foreign trusts 8. How to make the most of trusts 9. Tracker funds for foreign markets 10. Foreign companies on the London exchange 11. American Depository Receipts 12. Investing in American companies 13. Investing in European companies 14. Investing in Asian companies 15. Investing in other markets 16. Dividends and withholding taxes 17. Markets go global 18. Conclusion

• Mobius on Emerging Markets