Global equity funds, those that invest in both domestic and foreign stocks, returned on average 10.9% for 2005. Top performing global regions included Latin America, which benefited from the commodity market, and Japan, due to anticipated reform with the postal savings system.
Exchange-traded funds give investors the opportunity to add many of the global regions in their portfolio. Below is a sampling of regions and ETFs representing that area.
Japan iShares S&P/Topix 150 Index Fund (ITF) This ETF had a return of 24% in 2005 and is down 0.3% for 2006. This year’s returns have been attributed to profit taking and a scandal at Livedoor, one of the technology companies. The markets are rebounding and a return of inflation should encourage consumer spending.
Latin America iShares S&P Latin America 40 Index (ILF) Strong earnings growth, attractive valuations, benign inflation have helped this ETF return 16% this year after a stellar return of 53% in 2005.
Emerging Markets BLDRS Emerging Markets 50 ADR Index (ADRE) This regional ETF returned 39% in 2005 and is up 12% year-to-date. Emerging markets offer growth at a reasonable price.
Asia-Pacific BLDRS Asia 50 ADR Index (ADRA) These countries are largely export-driven and are influenced by currency fluctuations. With earnings growth at 13% and trading at 12.4 times projected earnings, this region offers high growth at a low price.
Europe iShares MSCI Austria Index (EWO) The continent has reasons to be cautious – low wage growth, high taxes and high unemployment. However, there are opportunities within Europe. Economic growth continues in Eastern Europe and Turkey has lowered interest rates and expanded its banking sector.