Among equity funds registered in the U.S., about 15 percent of their assets are invested in foreign stocks. Yet over 50 percent of new money is going into foreign funds.
According to the Investment Company Institute (ICI), Washington, D.C., this trend has been apparent since last year. Equity funds that invest primarily overseas posted an inflow of $67 billion in 2004, the ICI reports, which topped the previous annual foreign-fund inflow peak of $50 billion, set in 2000. During 2004, inflows into foreign funds accounted for 38 percent of the overall stock-fund flow, which was barely the second largest percentage on record. (In 1994, world equity fund flows represented 39 percent of overall stock fund flows.)
Investors should recall, though, that this peak inflow (39 percent in 1994) occurred just before domestic stocks surged in the bull market of the late 1990s. Therefore, while it makes sense to hold some money in foreign stock funds, you shouldn’t neglect the U.S. stock market.
