Two Good Global Growth Funds
Daniel Wiener, editor of the Independent Adviser for Vanguard Investors, says global investing is here to stay, and he recommends one active and one index fund to play it.
From December 1999 through December 2009, while Vanguard 500 Index (VFINX) lost a total of 9.8%, Vanguard Total International Stock Index (VGTSX) gained 25.3%, and Vanguard Emerging Markets Stock Index (VEIEX) was up 155.3%! How can we not consider investing overseas?
For decades, the US economy was the engine of growth worldwide. US consumers not only placed great demand on our own goods and services, but also on those of foreign companies.
Yet, as trade barriers have fallen, the rise of a new middle class, with growing incomes and growing appetites for all manner of products, has led to a sharp rise in domestic demand in countries like the BRICs—Brazil, Russia, India, and China—not to mention many still-emerging economies.
Much of the world's economic growth already occurs outside of the United States. The International Monetary Fund (IMF) forecast released in July suggests that while the US will grow 3.3% for all of 2010 and Europe will grow by just 1.0%, developing Asian nations will growth by 9.2%, with China and India expected to see growth at 10.5% and 9.4%, respectively.
This more rapid growth means that faster-growing economies are grabbing a larger share of world production.