With ETFs, investors can also break down international exposure to developed and emerging markets. For instance, the iShares MSCI EAFE ETF (NYSEArca: EFA) and Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) both track developed markets outside of North America. On the other hand, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) provide access to the world’s developing economies.

“Because emerging markets tend to have higher volatility than developed, they can circumvent emerging markets altogether–investing in an MSCI EAFE fund or an actively managed fund that systematically downplays emerging markets,” Benz added. “On the flip side, if they’re enthusiastic about emerging markets, they can layer on a dedicated emerging-markets fund or invest heavily in a diversified foreign-stock fund that buys heavily into emerging markets.”

Lastly, potential investors should be aware of currency risks associated with overseas exposure – depreciating local currencies would mean that any returns are lower in U.S.-dollar-denominated terms. Nevertheless, there is a growing number of currency hedged-equity ETFs on the market. Among the more popular Europe plays, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) hedge against the euro currency and would outperform a non-hedged Europe equity ETF if the euro currency depreciates. [Europe ETFs Can Turnaround Next Year]

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article. Tom Lydon’s clients own shares of EFA.

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