Cut your risk with these foreign ETFs

Investing outside of Canada and the U.S. can expose you to more volatility and risk. The sharp downturn in many foreign markets during the global recession proves this. But there are still countries and regions that offer lots of growth potential and opportunities for diversification.

One of the best ways to invest in foreign markets is through exchange-traded funds (ETFs). That’s because directly investing in those markets can be complicated and risky, and high-quality ETFs let you make international investments with greater safety. As well, the best ETFs offer a great combination of low fees and top-quality stocks.

Here are four foreign ETFs we like:

ISHARES MSCI BRAZIL INDEX FUND $67.20 (New York Exchange symbol EWZ; buy or sell through brokers), is an exchange-traded fund that is designed to track the Brazilian stock market.

The fund’s top holdings are Petrobras preferred shares (energy), 11.3%; Cia Vale do Rio Doce (mining) preferred shares, 10.4%; Petrobras common shares, 9.2%; Itau Unibanco Multiplo SA (banking), 8.3%; Cia Vale do Rio Doce common shares, 7.8%; Banco Bradesco preferred shares (banking), 4.9%; Itausa-Investimentos Itau (conglomerate), 2.9%; Cia Siderurgica Nacional SA (steel), 2.8%; Cia de Bebidas das Americas preferred shares (beer and other beverages), 2.7%; and OGX Petroleo e Gas Patricipa (energy), 2.2%.

The ETF’s industry breakdown is as follows: Materials, 30.0%; Energy, 23.4%; Financials, 21.6%; Consumer Staples, 7.1%; Utilities, 5.2%; Consumer Discretionary, 4.1%; Telecommunication Services, 3.0%; Industrials, 2.9%; and Information Technology, 2.2%. The fund has an expense ratio of 0.65%.

iShares MSCI Brazil Index Fund’s concentration in certain stocks, such as Petrobras and Cia Vale do Rio Doce, adds risk, as does its focus on the Resource sector. However, both stocks are among the highest-quality Brazilian companies available for investors, and both serve growing markets.

iShares MSCI Brazil Index Fund is a buy for aggressive investors.

ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $25.73 (New York Exchange symbol ESR; buy or sell through brokers), is an ETF that aims to track the MSCI Emerging Markets Eastern Europe Index. The fund’s geographic breakdown is as follows: Russia, 73.6%; Poland, 14.9%; Hungary, 6.8%; and Czech Republic 4.8%.

iShares MSCI Emerging Markets Eastern Europe Index Fund’s top holdings are Gazprom (Russia: gas utility), 19.4%; Lukoil (Russia: oil and gas), 9.6%; Sberbank (Russia: bank), 8.7%; MMC Norilsk Nickel (Russia: mining), 5.5%; Mobile TeleSystems (Russia: wireless), 4.3%; Rosneft Oil (Russia: oil and gas), 4.0%; OTP Bank (Hungary: bank), 3.3%; PKO Bank Polski SA (Poland: bank), 3.0%; CEZ AS (Poland: utility), 2.9%; and Tatnef (Russia: oil and natural gas), 2.8%.

The fund’s industry breakdown is as follows: Energy, 45.7%; Banks, 22.4%; Materials, 13.5%; Telecommunication Services, 10.9%; Utilities, 3.4%; Pharmaceuticals, Biotechnology and Life Sciences, 1.9%; Food, Beverages and Tobacco, 0.6%; Media, 0.5%; Software and Services, 0.4%; and Real Estate, 0.5%. The ETF has an expense ratio of 0.72%.

The fund’s concentration in Russia adds risk, but the outlook for oil and gas, as well as other resource prices, is positive. As well, central European stocks should improve as the global economy rebounds further.

iShares MSCI Emerging Markets Eastern Europe Index Fund is a buy for aggressive investors.

ISHARES S&P INDIA NIFTY 50 INDEX FUND $25.60 (Nasdaq symbol INDY; buy or sell through brokers), is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities on the National Stock Exchange of India.

The fund’s top holdings are Reliance Industries (conglomerate), 11.4%; Infosys Technologies (software), 8.6%; ICICI Bank, 7.0%; Larsen & Toubro Ltd. (conglomerate), 6.4%; Housing Development Finance, 4.8%; ITC Ltd. (conglomerate), 4.5%; State Bank of India, 4.1%; Bharat Heavy Electricals, 2.6%; and Tata Consulting Services (information technology), 2.4%.

The fund’s industry breakdown includes: Banks, 17.8%; Computers: Software, 13.1%; Refineries, 11.9%; Steel and Steel Products, 5.3%; Finance: Housing, 4.8%; Power, 4.6%; Cigarettes, 4.5%; Electrical Equipment, 4.2%; Automobiles, 4.2%; and Telecommunication Services, 3.8%. The ETF has an expense ratio of 0.89%.

India’s economy has grown by more than 9% annually over the last few years. The weak global economy has hurt growth, but India could expand by 7.2% this year, and as much as 9% next year.

iShares S&P India Nifty 50 Index Fund is a buy for aggressive investors.

ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $39.06 (New York Exchange symbol FXI; buy or sell through brokers) is an ETF that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest and most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on the New York exchange.

The fund’s top holdings are China Mobile, 10.0%; China Construction Bank, 8.9%; Industrial & Commercial Bank of China, 7.8%; China Life Insurance, 4.6%; CNOOC Ltd., 6.2%; China Unicom Hong Kong, 6.2%; Ping An Insurance Group, 4.1%; Bank of China, 4.1%; PetroChina, 4.1%; and China Petroleum & Chemical, 4.0%.

The fund’s holdings give it the following industry breakdown: Financials, 44.8%; Telecommunications, 18.4%; Oil and Gas, 14.2%; Basic Materials, 10.9%; Industrials, 8.7%; Consumer Services, 2.0%; and Utilities, 0.7%. The ETF has an expense ratio of 0.73%. The dividend yield is 1.1%.

China’s economy continues to grow rapidly, and the long-term outlook for Chinese stocks is strong.

iShares FTSE/Xinhua China 25 Index Fund is a buy for aggressive investors.