A country fund, also known as a single-country fund, is a type of mutual fund that consists of investments of various types that are all in one country. It can include companies with international interests, of course, but they would be based in the country in question. A wide range of investment categories can be represented in a country fund, including stocks, bonds, currency, commodities, and real estate holdings.
To understand the meaning of country fund, it is first necessary to understand what a mutual fund is. A mutual fund is an investment portfolio consisting of a number of other investments combined into one group. Those who invest in the fund buy shares of the fund's total value rather than in the individual investments in the fund. A fund manager picks investments to be added to the fund, and shareholders can draw dividends based on increases in the fund's total value. Conversely, if the value of the fund decreases, the value of the shares decreases as well, making mutual funds a potentially risky investment, although their very nature makes them inherently low risk due to the fact that it would require many of the component investments to go down in value in order for the fund itself to lose value.
A mutual fund that has investments that originate entirely in one country is called a country fund. These funds are attractive to investors who wish to allocate investment funds into a particular country but do not want to risk all of their investment capital on a small number of investments or even a single investment opportunity. Due to their diversity, country funds and other mutual funds have the advantage of being very stable investments that rarely lose value and generally provide steady, if modest, growth, generally making them good low-risk, long-term investments, although no investment is completely without risk.
Various investment types may be part of a country fund. Typically, like many mutual funds, a country fund consists mainly of stocks of various companies based in the country in question, but other investment types like currencies, bonds, and commodities are also possible. A document called a prospectus is created for each country fund, like all mutual funds, and describes the possible investment types that may be included or added to the fund at a later time. This is legally binding and must be followed by the organization or individual managing the fund.