Exchange traded funds (ETFs) have made investing abroad more comfortable. Looking at one-year performance, most of the top ten ETFs are emerging markets. They include iShares MSCI Mexico (EWW), iShares MSCI Austria (EWO), iShares MSCI Brazil (EWZ) and iShares MSCI Singapore (EWS).
We talked to Donald Gold of Investor’s Business Daily about how investors should know what they’re getting into; during challenging times, foreign ETFs are more volatile. Investing abroad doesn’t ensure protection from a weak U.S. market, and a foreign markets’ decline will be harder than ours. To protect against steep losses you should sell out if an ETF breaks below its 200-day moving average or falls 8% from its peak, whichever comes first.
It’s wise to check an ETFs top holdings. Just because it says "China", it might not offer the diversification you’re looking for. For example, iShares FTSE/Xinhua China 25 Index(FXI) represents the 25 biggest Chinese companies listed on London’s Financial Times Stock Index.