Going Global With ETFs

March 11, 2007 at 1:27 am by Tom Lydon

Diversification in ones portfolio is always important and one way to diversify is to go global using exchange traded funds (ETFs). Look at the holdings in the ETF to make sure most of the holdings are not just American companies that do business abroad.

Hope Nelson-Pope of The Motley Fool says investing in international companies helps to recession-proof a portfolio. If the U.S. economy were to go down, this could be protection against total fallout. Going global also exposes one to new markets and ventures one wouldn’t come across stateside. Global markets have been out-performing U.S. markets over the last few years, offering investors some higher returns. One such ETF is iShares MSCI EAFE (EFA), which top holdings include BP, from the UK; HSBC Holdings also from the UK; Toyota Motor of Japan and Nestle of Switzerland. Last year, EFA was up 23%. Even after the recent market volatility, the ETF is up 1% year-to-date, compared to the S&P 500, which is down 1.2%.

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