The argument for investing globally used to be based on low correlations – if one area of the world tanks, another may be thriving. However, in 2008, stocks around the world plummeted, and during 2009, stocks around the world rose in unison.[Why the IMF Is Bullish On India’s ETFs.]
Correlation between foreign and U.S. stocks now stands above 90%. There are better reasons to invest globally now, though:
- Holdings are denominated in other currencies. By holding investments in another currency, an investor has a safeguard against possible devaluations of the dollar.
- Investing overseas gives you diversification away from U.S. assets. You wouldn’t work at General Motors and have your portfolio consist entirely of GM stock (would you?). Talk about having all your eggs in one basket. [6 Things You’re Missing If You Don’t Have Global ETFs.]
Zweig suggests thinking about international investing the same way you would domestic – look at sectors, growth, value and various asset classes. But whatever you do, be sure that international markets are a part of your overall portfolio, or you could wind up missing the boat.
For more information on international investments, visit our global ETFs category.
Among the many global ETFs investors have to choose from these days include these broad funds:
- Vanguard FTSE All World-Ex US ETF (NYSEArca: VEU)
- iShares MSCI EAFE Index ETF (NYSEArca: EFA)
- iShares MSCI All Country Asia Ex-Japan ETF (NYSEArca: AAXJ)
- Vanguard Emerging Markets ETF (NYSEArca: VWO)
- iShares MSCI Emerging Markets (NYSEArca:EEM)
- EGS Dow Jones Emerging Markets Titans Composite (NYSEArca: EEG)
- SPDR S&P Emerging Markets (NYSEArca: GMM)
- Schwab Emerging Equity Markets ETF (NYSEArca: SCHE)
- GlobalShares FTSE Emerging Markets Fund (NYSEArca: GSR)
Max Chen contributed to this article.