Going global to gird for end of US bull run

Here's a worst-case scenario: US stocks tumble. Japan, looking red-hot a few months ago, hits the market doldrums once again. Other Asian markets, spooked by Japan, sag.

All is not lost: Go international, as in one of the hundreds of mutual funds linked to overseas investing.

International funds, which tend to include diverse nations within their portfolios, were one of the few winners of the third quarter, along with technology funds.

Conditions are ripe for continued gains from abroad, says Russ Kinnel, equity editor for information-firm Morningstar Inc., in Chicago. With many overseas nations now coming back from their downturns in 1997 and 1998, following Asian currency failures, international funds can expect to post continued growth.

Moreover, Y2K computer concerns should not affect most funds, Mr. Kinnel says.

Here are some popular arguments why fund investors may want to think more globally in the future:

*Europe, where stocks have been laggards for much of this year, is starting to look like a strong investment opportunity, according to new analysis by financial firm Everen Securities Inc. in Chicago. Mergers have become increasingly common within the region. Companies are posting solid returns, both on the Continent, in the United Kingdom, and elsewhere that European firms do business.

*Japan and Pacific Basin funds continue to post gains. James Stack, editor of InvesTech, a market newsletter published in Whitefish, Mont., notes that Japan "is just starting to recover from nine years of recession," unlike the United States, which is now in the ninth year of a protracted bull market.

Mr. Stack says he is inclined to let profits from Japanese funds run their course, although he says it is important to monitor the investments carefully, lest they suddenly turn negative.

*Most major global firms have taken steps to reorganize their corporate structures in the past few years. Thus, large-scale overseas firms are better positioned for gains than in recent years.

*Finally, foreign nations are at a different stages in the economic cycle from the US, analysts note. Even if US financial markets run into economic problems in the months ahead, gains by overseas firms should help offset US market losses.

In looking for an international fund, seek no-load or low-load funds with the lowest possible expense ratios. Overseas funds require slightly more hands-on coordination than domestic funds, so expense ratios tend to run slightly higher than for other fund categories, says Walter Updegrave, author of "The Right Way to Invest in Mutual Funds."

A good rule, experts say, is to look for international funds with expense ratios of no more than 2.5 percent, and less if possible.

(c) Copyright 1999. The Christian Science Publishing Society