Vanguard International Growth Fund Case Solution & Answer

Vanguard International Growth Fund  Case Solution


  1. Explain why an individual investor might want to invest in an international
    growth fund.

Reasons of Investing in an International Growth Fund

There are a number of reasons with the individual investors to invest in an international growth fund, some of them are explained below:

  1. Diversification:This is the first and the most significant reason of investing internationally. It has been historically proved with the help of a number of researches that despite the strong economic history of the United States, it is unwise to have more than half of your stocks from only one country. With the help of this diversification, investment risk is spread to a number of markets which can allow an individual investor to gain better long-term returns.
  2. Growth:It can be seen that the the individual investor could gain significantly from investing in the emerging markets that have the potential to growth. Moreover, as the name implies, international growth funds are meant for growth purpose in capital invested.
  3. Gain International Exposure:This could be the most important reason, as it can be seen that almost half of the world’s market capitalization lies outside the United States and gaining live access to those companies could provide much exposure to boost the returns in the future.
  4.  Advises from International Fund Providers:The international fund providers such as the current company provide variety of knowledge regarding the performances of different economies,which are very helpful in decision making for a long term investment. Moreover, they would also help in taking appropriate steps to increase the returns.

    Risks in investing in an International Growth Fund

There are numerous risks which are faced by individual investors in investing in stocks whether they are in the domestic market or the international market. They are sub-divided into the common risks as well as unique risks as below:

Common Risks

These are the risks that are common in both the national markets as well as the international markets.

Investment Style Risk

This depends on the type of style you are investing,which could be investing in the value stocks, growth stocks or a blend of the both in creating a good portfolio. It can be seen that each has different features associated with them. It can be seen that it sometimes becomes favorable as compared to the overall market. However, it sometimes goes in the wrong direction, which significantly affects the returns.

Manager Risk

It can be seen that in any market, the manager plays a vital role in yielding the required return. It is the duty of the manager to take good care of the investment of its shareholders by taking the appropriate alternatives. The manager can potentially mislead the information by advising on the poor funds to invest which could strongly affect the returns from the stock.

Stock Market Risk

It can be seen that due to a number of factors, the performance of the stock market fluctuates significantly, which can lead to a decline in the stock prices and thus, yield lower returns.This is common in both the types of market whether it is domestic or international market………………

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