The fund you invested in for diversification away from US stocks may sound like a foreign fund, but it may not be as foreign as you expect. It may have a heavy dose of US companies, possibly throwing off your asset-allocation plan and duplicating stocks that are already in your US funds, resulting in overexposure to those stocks. 

Examples: Fidelity International Growth recently had 21% of its assets in US companies—including Mastercard and Visa—in its top 10 holdings. Artisan International recently had 15% in US giants such as Google parent Alphabet Inc. and 

That’s a lot more than the 2% ­average for foreign funds, which have names that include “international,” “overseas,” “emerging markets” or a country or region outside the US. In contrast, “global” funds typically are required to have between 25% and 75% US stocks in addition to foreign stocks.

This quirk has been especially evident in recent years because US stocks have been far outperforming foreign stocks. That may give funds that “cheat” on their name an unfair edge against competing funds that don’t. Some managers contend that by investing in US companies that get a lot of revenue from overseas, their funds do provide diversification away from the US economy. But the funds may underperform when the tide shifts back to foreign stocks.

What to do: At, check the percentage of assets your foreign funds hold in US stocks. If it’s more than 5%, that could be undermining the diversification you seek. Here are three top-performing foreign funds that have near-zero or no US exposure and have performed well over 10 years—T. Rowe Price Overseas Stock (TROSX), top 14% of category…USAA International (USIFX), top 7% …and Wasatch International Opportunities (WAIOX), top 12%. 

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