Is Europe a treasure trove of bargain-priced stocks now…or the most dangerous place on the planet for investors? Is the US a safe haven…or will it fall back into recession? And will a wrenching slowdown in China’s economic growth cast a shadow over the entire world?

If you’re not comfortable coming up with answers to these questions on your own, consider investing in one of the global mutual funds whose managers shift their investment choices back and forth around the world to try to boost returns, depending on where they see the greatest opportunities and the least frightening risks.

Bottom Line/Personal spoke with fund expert Todd Rosenbluth to find out which of the 800 “global” funds are best able to cushion your portfolio from global upheaval…

WHY YOU NEED THEM

Global funds have the freedom to roam as the varying outlooks for companies headquartered in different parts of the world shift. They also take great advantage of the fact that many companies generate much of their revenue and profits in various parts of the world, no matter where they are headquartered.

Over the past decade, global funds have returned, on average, 5.4% annually, beating both the Standard & Poor’s Index of 500 US stocks (4.3%) and the major foreign stock index, the MSCI EAFE (3.6%).

In deciding on a mix of stocks, most global fund managers first look at a key benchmark index—the MSCI All Country World Index, which targets US stocks as 45% of the mix…foreign stocks, 45%…and emerging-market stocks, 10%. Many of the global managers then adjust those allocations to varying degrees, sometimes dramatically, according to changing conditions.

AS A CORE HOLDING

The most cautious investors can use conservative global funds that tend to perform well in down markets as a core holding, replacing many of their US and foreign stock funds. My recommendations for core no-load global funds…

Tweedy, Browne Value Fund (TWEBX). This is a low-volatility way to play global stocks. The portfolio of about 50 large-cap, blue-chip value stocks focuses on consumer companies that have dominant brand names in many countries and whose shares trade for at least 30% below what the managers believe they are worth. Given the intense uncertainty in the world now, the fund currently has about 13% of its assets in cash, with the rest split evenly between US and foreign stocks. This includes some big winners this year, such as the UK-based company Diageo, the world’s leading producer of branded premium spirits, and Philip Morris International, the US-based tobacco company with the second-largest global sales of cigarettes and tobacco. (Of course, some investors may want to steer clear of a fund that takes heavy positions in companies that benefit from liquor and cigarette consumption.)

Through the financial crisis of 2008, the fund beat the S&P 500 by 12 percentage points and the MSCI EAFE index by 19 points. Performance: 10.8%.* www.Tweedy.com

Note: Investors seeking more fixed income can opt for the Tweedy, Browne Worldwide High Dividend Yield Value Fund (TBHDX).

USAA World Growth Fund (USAWX). This 20-year-old fund, run by the global asset-management firm MFS Investments, is one of the oldest and largest in the world stock category. It is for relatively conservative investors who want to take a bit more risk than the Tweedy, Browne Value Fund takes, owning growth stocks with strong balance sheets and, in the managers’ estimation, the potential to increase earnings by at least 8% a year. The fund limits its holdings to about 100 blue-chip, large-cap names, recently including Walt Disney…France-based LVMH Moët Hennessy Louis Vuitton S.A.…and UK-based Burberry Group. The fund holds almost no stocks of companies headquartered in emerging markets now after a big run-up in share prices (14%) in the first quarter of 2012. Performance: 11.2%. www.USAA.com

AS A SUPPORT PLAYER

If you feel fairly comfortable with your core mutual funds but want to add a global fund for a portion of your assets, consider putting 10% or more of your portfolio into funds that often delve into small- and mid-cap companies and faster-growing, more volatile sectors such as technology. My recommendations for no-load global funds to use in a support role…

Artisan Global Value Fund (ARTGX). This tiny fund, launched in 2007, is for relatively aggressive investors. It is run by the same team that manages Artisan International Value—they were chosen as Morningstar International Stock Fund Managers of the Year for 2008. The managers use a similar strategy here, hunting for undervalued businesses of any size that have a sustainable competitive advantage and strong free cash flow. The managers take a more daring approach than most global funds, willing to hold as few as 30 stocks in their portfolio, with as much as half the assets in small- and mid-cap companies and as much as 30% of the portfolio in emerging markets if conditions are right.

Many of the fund’s holdings are under-the-radar stocks that small investors may not own or buy on their own, including the German cement producer Heidelberg Cement and Aon Corp., a global insurance broker and human resources consulting firm that recently changed its headquarters from the US to the UK to get better tax treatment. The fund recently had 50% of its portfolio in US stocks, including companies with a global focus as well as those with a domestic focus. Performance: 13.33%. www.ArtisanFunds.com

Janus Global Research Fund (JARFX). Since 2006, this fund has outperformed 90% of its peers by owning about 150 undervalued growth stocks. One-third of the stocks are small- or mid-caps, such as Japanese automaker Isuzu Motors, which discontinued the sale of passenger vehicles in the US in 2009 but has become the dominant truck manufacturer in Asia and Africa. The fund is up by 7% this year (through July 31), with 50% of assets in US stocks and 47% in foreign stocks, including 4.5% in emerging markets, reflecting caution on the global outlook. Performance: 10.6%. www.Janus.com

*All performance figures are based on three-year annualized returns through October 8, 2012.

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