Country-Specific ETFs Tell Two Stories
January 11th at 2:00pm by Tom Lydon
If they’re smartly played, country-specific exchange traded funds (ETFs) can deliver rewards.
Country-specific ETFs, such as iShares Austria (EWO), give investors a great way to take advantage of growth in regions such as Eastern Europe. Two years ago, we made a small bet on EWO because we liked the exposure to Austria as well as the fast-growing emerging markets elsewhere in the area. We knew this ETF was a gamble because of its highly concentrated two-dozen stocks, making it susceptible to price swings. We watched the ETF jump 28% before selling it in 2006.
After walking through the streets of cities such as Prague with my family last Summer, I took notice of bank branches filled with customers and the numerous ads for cell phones, many of which were offerings from companies in EWO’s portfolio.
Advisors are using these country-specific ETFs in a variety of ways, reports Rob Wherry for SmartMoney, from a substitute for individual stock picking to getting boosted returns away from a generic, broad-based ETF. Such strategies can hold the hopes of big returns but they are also carrying different levels of risk, so be sure to do your research.
