I want to invest in mutual funds that own U.S. stocks, but as a citizen of Belgium I find it's very hard to do that. Are there mutual funds in which anybody can invest without geographic restrictions.

Paul's Answer:

You already know the bad news: U.S. tax laws prevent you from owning U.S.-based mutual funds on the same terms as U.S. resident citizens. You can purchase shares of certain U.S. mutual funds, but those funds are required to withhold 15 percent of your dividends and other distributions for taxes. You may eventually get that money back, depending on your individual tax situation. But in the meantime it is not working for you, either as cash or as reinvested fund shares.

The good news is that you can buy offshore mutual funds, which are registered outside the United States under the laws of a foreign country such as the Bahamas, Bermuda, the British Virgin Islands, Luxembourg and the Isle of Man. These funds cannot be sold or distributed within the United States or to U.S. citizens.

Special subsidiaries of some U.S. fund families have offshore funds. These include Warburg Pincus, Alliance Capital, Janus, Scudder, MFS, Fidelity, Putnam, AIM, Templeton and Morgan Stanley Dean Witter. Their offshore funds are often modeled after U.S. funds and managed by the same portfolio managers.

I do not have access to specific information on these funds, and for that reason I cannot make specific recommendations. However, choosing from among offshore funds should not be much more difficult than choosing from among standard U.S. funds.

By far the most important step is to find a fund or funds that invest in the types of assets that will be most productive for you. For the best combination of risk and return over a long period, diversify into U.S., international, large, small, growth and value stocks.

Look for funds with no sales loads or 12b-1 fees, with relatively low expenses and relatively low portfolio turnover. Choose a fund with a good track record, only moderate risk and a seasoned manager.

Read the fund's prospectus carefully and don't invest until you understand any restrictions or tax implications that might apply to you as a citizen of Belgium.

For more information, you can call the international investing department at Charles Schwab, in the United States at (602) 852-3500 or 852-3520. On the Web, check out www.wallstreetoffshore.com.