Regional exchange traded funds (ETFs) are a lucrative tool for many investors, however, before jumping onto the overseas bandwagon, Mark Fightmaster for Schaffers Research has three points to give you more knowledge:
- What is an ETF? First off, an ETF is a basket of securities that represents a specific sector, region or specific index. ETFs are like a mutual fund, yet trade throughout the day like a stock. They are priced and traded continually throughout the day, and provide transparency, liquidity, and cost efficiency.
- What international markets can you invest in? There are a variety of options here, one being single-country specific funds. Through the iShares line you can gain access to Austria, Spain, Germany, Singapore even Australia. Or if you don’t want to be country-specific there are foreign telecommunications, technology, financials, or healthcare. Then there is the regional focus. Pacific markets, Asia, emerging markets, and developed markets. The options are wide open.
- Why invest in international markets? 70% of global output and over half of the world’s equity markets capitalization come from places outside the U.S. Diversification is a good way to reduce risk and increase bottom-line profits. An international ETF is a good way to diversify; they offer a low correlation to domestic markets. Make sure you take a look at the holdings and know what you are investing in.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.