Essay Example on the Vanguard International Growth Fund

The Vanguard Group is made up of more than 50 discrete funds. The public is allowed to invest in these mutual funds. The Vanguard International Growth Fund is one of the 13 international funds that invest in non-U.S bonds and stocks.

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The Fund concentrates on investments in companies that not within the U.S. and is expected to increase its market to Europe, Latin America and the East. It uses investment advisors to evaluate external markets and choose small, mid, and large capitalization companies that are considered to be above average in terms of potential for growth.

This Fund encounters risk of investment style. This implies that the probability that returns from growth stocks outside U.S and to the height of the Fund being invested in them, mid and small-cap stocks, will follow returns from the market of the domestic stock.

The fund is also subject to risk of stock market. This is the probability that the overall stock prices will go down. It is important to note that prices in U.S stocks and foreign stocks prices at times at times have taken opposite directions.

The Fund is also subjected to regional/country and currency risks. Regional/country risk implies that there is a chance that events in world, for example financial troubles will negatively impact the security value offered by foreign companies. Currency risk is seen as the probability that the foreign investment value, measured in terms of U.S currency will decline as a result of changes that are unfavorable in the rates of currency exchange.

There is also manager risk. This is the probability that unfavorable selection of security or security focus in a given sector will make the Fund underperform several relevant benchmarks.

Question 1

Investing in an international growth fund enables diversification of portfolio. If an individual ties his money in one country, he is putting himself in a big risk. F one chooses to invest in other countries, he will be in a position to put up with economic troubles in his home country. Another reason is potential for growth. There are many markets in several countries that are underdeveloped. Investing in such areas will bring about growth. Investing internationally also brings itself with several options. One has many options to choose from.

Question 2

The risks are:

Risk of Investment style. This implies that the probability that returns from growth stocks outside the domestic country and to the height of the Fund being invested in them, mid and small-cap stocks, will follow returns from the market of the domestic stock.

Risk of Stock market. This is the probability that the overall stock prices will go down. It is important to note that prices in the domestic stocks and foreign stocks prices at times have taken opposite directions.

Regional/country risk. Regional/country risk implies that there is a chance that events in world, for example financial troubles will negatively impact the security value offered by foreign companies.

Currency risk. Currency risk is seen as the probability that the foreign investment value, measured in terms of domestic currency will decline as a result of changes that are unfavorable in the rates of currency exchange.

The risks that are common to domestic and international funds include: risk of investment style, currency risk and risk of stock prices. Regional/country risk is unique to an international fund.

Question 3

These pose a risk as they make investors encounter risks that are typically not associated in any way with U.S companies, since foreign bond and stock markets are operated in a different manner from the markets in the U.S.

Question 4

Europe has the largest share of investment (55%) because the region is developed and has markets for the Fund. Generally, the allocations are based on the availability of already developed and emerging markets. The Middle East received the least allocation of 1 percent since the region is least developed.

Question 5

The Fund is heavily invested in the United Kingdom followed by Japan and China. A country such as Sweden would be expected to have greater investment than just 4.7%. This is because the country is known for her high economic chest and development records and therefore would be welcome larger investment of the fund.

Question 6

The fund is most invested in consumer discretionary with investment of 16.6%. this sector include companies that deal with non-essential goods and services. This can be owed to the fact that the sector has the highest wage growth.

Conclusion

From the statistics provided by the World Trade Organization, the fund has made a loss of 8.31% in the past one year. It has returned 4.01% of its investment for the past three years, 2.31% for the past half a decade, and 3.50% for the past 10 years.

As a measure to increase investment in foreign countries, the Fund should deploy more advisors in several areas of the globe to come identify potential investment regions. The U.S. should also come up with policies that encourage international investments.

References

Doupnik, T., l. Seese. (2001). Geographic Area Disclosures under SFAS 131: Materiality and Fineness. Journal of International Accounting, Auditing & Taxation.

Kubin, Konrad. (2006). Preface, International Accounting Bibliography 1982-1994. FL: Internatinal Accounting Section of the American Accounting Association. Sarasota.

U.S. Department of Commerce. (September, 2001). Small and Medium-Sized Enterprise Play an Important Role. Export America.

World Trade Organization. (2012). International Trade Statistics.