Choose wisely. There is only one correct answer to each question.
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1.
Which of the following is not true about emerging-markets stocks?
They are low risk. Emerging-markets stocks usually behave unlike U.S. stocks and thus can make great diversifiers. They also have the potential to post higher returns. But they're exceptionally high risk.
2.
To find out if a fund owns a lot of emerging-markets stocks, _______.
Examine what countries most of its stocks hail from. Funds with substantial emerging-markets positions may not be categorized as emerging-markets funds. Check the fund's exposure to Latin America and the Pacific Rim to get a sense of how much it invests in emerging markets.
3.
Why own an international fund?
Both of the above. Many international funds do well when U.S. funds aren't doing quite as well. As a result, they offer both good return potential and diversification.
4.
To choose a good international fund, _______.
Understand how the fund invests. While you should certainly examine a fund's rating and its past returns, you must also understand how the fund invests--the sort of companies it owns and the countries they're from.
5.
Which would likely be most volatile?
A Latin America fund. A Latin America fund is both a regional and emerging-markets fund at the same time, and it would therefore be the most volatile of the group.
