Photo: Flickr user epSos.de.

Any good portfolio of stocks is diversified. It shouldn't have too much invested in any single company, lest that company's stock tank and take the entire portfolio down with it. It should have its assets spread across a number of industries, too. Another important form of diversification is geographic. Exposure to stocks outside U.S. borders is important, and a good way to get it is through one or more of the best global stock funds.

First off, let's get a few things straight. A "foreign" or "international" mutual fund will be focused on foreign companies that are based outside the U.S. A "global" fund, meanwhile, aims to include the whole globe, including both foreign and U.S. companies. Below are some of the best global stock funds, with a few details about each, for comparison. Each splits the assets invested in it mostly between U.S. and non-U.S. stocks, along with some cash. The portion in non-U.S. stock ranges from about 40% to 50%.

Name

Yield

5-Year Average Annual Return

Expense Ratio

Turnover

Mininum Initial Investment

Dodge & Cox Global Stock (DODWX)

1.26%

12.1%

0.65%

24%

$2,500

Fidelity Worldwide (FWWFX)

0.32%

11.9%

1.08%

161%

$2,500

Harbor Global Growth (HGGIX)

0.01%

13.8%

1.27%

110%

$2,500

MFS Global Equity I (MWEIX)

0.53%

12.3%

1.04%

11%

None

Oakmark Global Select I (OAKWX)

0.77%

12.5%

1.13%

24%

$1,000

Vanguard Total World Stock ETF (VT 0.93%)

2.37%

9.7%

0.18%

N/A

1 share

Data: Morningstar.com.

Comparing funds

Which of the global stock funds above is best for you? It depends; each has some pros and cons. The first five are mutual funds, while the sixth is an exchange-traded fund that trades like a stock. The Vanguard Total World Stock ETF is based on an index of most of the world's stock, so there's not much buying and selling except when new companies debut or existing ones go out of business. The turnover column shows how much buying and selling the managers of the other funds do. A lower turnover rate is generally preferable, as it keeps trading (commission) costs down. It can also indicate that the fund managers are more confident in their picks and aim to have longer holding periods. A turnover ratio above 100% means that the fund is turning over more than the entire value of the fund, trading enough to more than replace every share it owns. However, high turnover rates aren't necessarily deal-breakers, as the solid performances of the Fidelity and Harbor funds attest. Their managers are apparently trading frequently but making smart moves.

It's common for fund hunters to focus on annualized returns, but don't give those numbers too much importance, because a single great year can distort the average, and funds that are hot for a year or two don't usually stay hot. Note, however, that during the five-year period above, the benchmark world-stock growth rate for the mutual funds was 10%, per Morningstar.com data, so all five mutual funds topped that handily. The Vanguard ETF also outperforms its own benchmark.

Photo: Flickr user Horia Varlan.

Keep in mind that fund fees (measured by expense ratios that reflect the percentage of assets charged per year) matter a lot, and global funds can have higher expense ratios than the typical U.S. stock fund. In the selection of global stock funds above, the best mutual fund fee is the Dodge & Cox one, though the index-based ETF's fee is far lower still -- no surprise there, as index funds generally boast the lowest fees in the fund business.

If you'd like some dividend income, then the Dodge & Cox fund or the ETF is a good bet. The other funds are not slouches, though, and you'd probably do well with any of them. The minimum initial investment amounts might steer you toward some over others, and your brokerage might offer access to more than one of them. It's smart to dig deeper into any fund that interests you, visiting its website and reading its prospectus and perhaps some commentary by its managers in order to get a feel for their investment approaches. For a simple solution, opt for the Vanguard total world market ETF, and you'll be invested all over the world.

Stocks over funds

If you're an investor with the time, skills, and inclination to choose individual stocks instead of mutual funds, you can still add exposure to international markets to your portfolio -- either through international stocks themselves or through a host of big American companies that generate much of their revenue abroad. PepsiCo, for example, generated about 49% of its revenue abroad in fiscal 2013, and that number is 76% for McDonald's, 40% for Amazon.com, and 59% for Nike.

No matter how you do it, be sure to include some international exposure in your portfolio. For many, buying one or more of the best global stock funds is a good way to start.