Overseas stock funds are finally making a difference for fund investors. Investors are looking to trim U.S. investments which are getting increasingly expensive. Instead, they intend to put that cash into cheaper foreign stocks, which in turn has helped foreign stock funds outdo U.S. equals in the first half.
Support from central banks also played a major role in lifting foreign stock funds. This calls for investing in such sound funds for better returns.
Overseas Stock Funds Outdo US Funds
Mutual funds focused on U.S. stocks have gained 2.7% in the second quarter, marking the fifth straight quarterly gains as corporate earnings are on a roll. U.S. stock funds were up 7.7% in the first half. However, overseas stock funds did even better, gaining 6.5% in the second quarter and 15% in the first, according to Thomson Reuters Lipper data. Cheap valuations in rest of the world and favorable central bank policies have turned the tide.
Almost $78.42 billion were invested in international stocks in the second quarter, as per Investment Company Institute data. On the other hand, $23.31 billion flowed out of U.S. stock funds in the said quarter.
Growth Funds & Technology Dominate US Stock Funds
U.S. growth equity funds outdid value offerings in the first half of the year. Large-growth category was the best performer, with mid- and small-growth not lagging behind much. Growth oriented sectors such as technology also gave handsome returns. Tech has come a long way, evolving from the dot-com catastrophe to becoming a safety trade and are now favored by active managers. Investors are pouring money into Internet and tech companies, which are less vulnerable to tax cuts and changes in interest rates. Needless to say, tech companies have also posted impressive first-quarter earnings.
Morgan Stanley Institutional Growth I (MSEQX – Free Report) , which holds almost half of its assets in tech stocks, was up more than 27% in the first half. It topped the large-growth category and was mostly boosted by Tesla Inc (TSLA – Free Report) , one of its top holding companies.
