Additionally, the Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) tracks developed markets, excluding the U.S. Country weights include Japan 23.0%, U.K. 19.5%, Switzerland 8.8%, France 8.6%, Germany 8.1%, Australia, Korea 3.9%, Hong Kong 3.7%, Spain 3.1%, Sweden 2.8%, and Netherlands 2.7%. VEA, which tracks a FTSE index, includes South Korea as a developed country, whereas MSCI considers the country an emerging market.
Currency risk is also a consideration as global central banks are enacting loose monetary policies while the Federal Reserve is thinking about a rate hike. Consequently, investors can hedge the currency risks and capture developed overseas market exposure with the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF) and iShares Currency Hedged MSCI EAFE ETF (NYSEArca: HEFA). HEFA basically holds the same positions as EFA, except the hedged version uses cash and derivatives to mitigate the negative effects of a depreciating euro currency. DBEF tracks a hedged version of the MSCI EAFE Index as well.
Looking ahead, Hans Mikkelsen, a credit strategist at Bank of America Corp., argues that inflation will be the “key thing” for investors to focus on in the next five years.
“The current situation where long-term inflation expectations are robust – despite the big declines in oil prices – depicts a much better outlook for global growth,” Mikkelsen added.
For more information on the global markets, visit our global ETFs category.
Max Chen contributed to this article.