How a Changing Global Economy Affects ETF Investing

April 22nd at 2:00pm by Tom Lydon

ETF british pound As many developed countries are stagnating, and may remain so for the time being, exchange traded fund (ETF) investors are looking overseas for new opportunities. Take the denizens of the United Kingdom, for example.

It is likely that the United Kingdom’s growth may come to a crawl in the coming couple of years as a result of large debt and high taxes, writes Stephen Womack for Mail Online. Investors are becoming increasingly worried about a long-term decline. That’s why at a recent trade meeting, investors and savers wanted to know how to structure their savings for a changing world.

The International Monetary Fund projects Britain’s recession will continue into 2010, longer than any other developed nation. It is also estimated that the government borrowings will increase to 11% of GDP by 2010, or two times the average of G20 nations.

The sterling pound is down around 25 cents against the dollar and 12 cents against the euro. The long-term aspects don’t look all that appealing either with exports down and the country’s North Sea oil drying up.

Since the structural economic problems in western countries won’t be easily fixed, many investors are shifting their attention to the East, or newer economies. Some investors are also looking into countries with high interest rates, but it should be noted that there are risks in exchange rates.

At the trade meeting, one investor noted that there has always been a natural rise and fall in how nations perform in the long term, and that we’re currently in another big shift with the United States and United Kingdom seeing some decline.

This highlights the versatility of ETFs – you can use them to make plays on different world events, shifting climates and changing trends. Just because one area is in a funk doesn’t mean that every area is. Use ETFs to spot new opportunities and have an entry and exit strategy.