=+LG 4 P19–4 International investment diversification The economies of the world tend to rise and fall in cycles that offset each other. International stocks can be used to diversify an investment portfolio and counter these movements. Therefore, many individual investors prefer to invest in a foreign equity mutual fund since it offers an investor the expertise of a global fund manager. By investing in foreign mutual funds, the investor is exposed to overseas markets at varying risk levels. Economic and currency risk can swing in a positive or negative direction. Thus, diversification is the key to managing risk. Funds that invest overseas are classified into four basic categories: global, international, emerging-market, and country-specific.