The U.S. equities market has made an impressive run but it only makes up a portion of the total picture. Investors can branch out into overseas exposure with exchange traded funds as a way to diversify a U.S.-centric portfolio.
At the ETF Virtual Summit on January 15, the featured panel on “Simple Global Strategies in a Sophisticated ETF World,” with experts from ETFGI, WisdomTree, Deutsche Asset Wealth Management and MSCI, will highlight ways to navigate the global marketplace.
To start off, an investor would begin with developed or emerging market exposure.
A fund such as the iShares MSCI EAFE ETF (NYSEArca: EFA), which tracks developed market stocks in Europe, Australasia and the Far East, provides adequate exposure to most developed countries, excluding developed North American economies U.S. and Canada.
Within the developed markets space, Japan has stood out as the Bank of Japan aggressively fights deflationary pressures and stimulates the economy with an unprecedented bond purchasing plan. Consequently, the db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) and the rival WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) were among the top-performing single-country ETFs, buoyed in large part by the tumbling yen. [It’s in the Charts: It Could be a big 2014 for Japan ETFs]
On the other hand, investors can find broad emerging market exposure through ETFs like the iShares MSCI Emerging Markets ETF (NYSEArca: EEM).
Looking at the emerging markets, investors have taken an interest in China, the world’s second largest economy. Recently, Deutsche Bank launched the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), which allows investors to directly access Chinese A-shares stocks, which trade on Chinese exchanges. [DB Plans Expansion of China A-Shares ETFs]
While investing in global markets diversifies an investment portfolio, investors will also have to weigh the risks. Specifically, currency risks.
Foreign equity exposure will come with foreign currency exposure – foreign stocks are denominated in the local currency. Consequently, potential investors should be aware that a depreciating foreign currency or strengthening U.S. dollar could hurt returns in a foreign investments.
Financial advisors interested in attending the annual virtual summit on January 15 can register at ETF Virtual Summit registration.
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.