Five top foreign iShares ETF buys

Exchange-traded funds (ETFs) have gained popularity in recent years, mainly because many ETFs offer very low management fees. In addition to low fees, the best ETFs offer well-diversified, highly tax-efficient portfolios.

However, quality varies. The investment industry has created all sorts of ETFs. All too many exist to tap into popular, but risky, themes and fads, so you need to be highly selective with your ETF holdings.

Here are five foreign ETFs we like:

ISHARES MSCI JAPAN INDEX FUND $10.60 (American Exchange symbol EWJ; buy or sell through a broker) is an exchange-traded mutual fund that tries to match the return of the Morgan Stanley Capital International (MSCI) Japan index.

The fund’s top holdings include: Toyota Motor, 5.0%; Mitsubishi UFJ Financial Group, 2.9%; Honda Motor, 2.6%; Canon, 2.0%; Sumitomo Mitsui Financial, 1.9%; Takeda Pharmaceutical, 1.6%; Tokyo Electric Power, 1.6%; Sony Corp., 1.6%; Mitsubishi Corporation, 1.5%; and Nintendo Co., 1.4%.

The fund’s industry breakdown is as follows: Consumer Discretionary, 19.7%; Industrials, 19.1%; Financials, 17.0%; Information Technology, 13.7%; Materials, 8.0%; Utilities, 6.0%; Health Care, 5.9%. Consumer Staples, 5.5%; Telecommunication Services, 3.7%; and Energy, 1.2%.

iShares MSCI Japan Index Fund was launched on March 12, 1996. Its expense ratio is 0.56%.

Japanese gross national product (GNP) shrank 5% last year. However, the country’s economy now seems to be strengthening. Industrial production fell 0.9% in February. This, though, was the first monthly decline in a year, and industrial production appears to have grown in March. Moreover, February consumer spending was up for the fifth straight month. The unemployment rate was unchanged at 4.9%. It dropped below 5% in January for the first time since March 2009. The key Nikkei index is now above 11,000 for the first time since October 2008.

iShares MSCI Japan Index Fund is a good way for safety-conscious investors to buy Japanese stocks.

iShares MSCI Japan Index Fund is a buy.

ISHARES MSCI EMERGING MARKETS INDEX FUND $43.36 (New York Exchange symbol EEM; buy or sell through brokers), is an exchange-traded fund that aims to track the MSCI Emerging Markets Index.

The fund’s geographic breakdown includes: Brazil, 14.7%; South Korea, 12.3%; China, 10.6%; Taiwan, 10.5%; South Africa, 8.0%: Hong Kong, 6.9%; India, 6.5%; Russia, 6.3%; Mexico, 4.9%; and Israel, 3.3%.

iShares MSCI Emerging Markets Index Fund’s top holdings are Samsung Electronics, 3.2%; Taiwan Semiconductor (Taiwan: computer chips), 2.4%; Petrobras (Brazil: energy), 2.4%; Banco Itau Holding Finance (Brazil: banking), 2.2%; Posco (steel), 1.9%; China Mobile (China: wireless), 1.9%; Vale SA (Brazil mining), 1.8%; Gazprom (Russia: gas utility), 1.6%; and Banco Brandesco (Brazil: banking), 1.6%.

The fund’s industry breakdown is as follows: Financials, 24.5%; Energy, 14.8%; Materials, 14.4%; Information Technology, 14.3%; Telecommunication Services, 9.3%; Industrials, 5.8%; Consumer Discretionary, 5.1%; Consumer Staples, 5.1%; Utilities, 3.8%; and Health Care, 2.2%.

iShares MSCI Emerging Markets Index Fund was launched on April 7, 2003. The exchange-traded fund has an expense ratio of 0.72%.

iShares MSCI Emerging Markets Index Fund’s wide diversification among emerging markets tones down its risk, but emerging markets are still far more volatile and vulnerable to downturns than markets in the developed world.

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

ISHARES MSCI SOUTH KOREA INDEX FUND $51.65 (New York Exchange symbol EWY; buy or sell through brokers), is an ETF that aims to track the MSCI Korea Index. The index aims to capture 85% of the total market capitalization of the South Korean stock market. The other 15% is unavailable for investment, partly due to limitations on foreign ownership.

The fund’s top holdings are Samsung Electronics, 18.0%; Posco (steel), 7.6%; Hyundai Motor Co., 3.9%; Shinhan Financial, 3.7%; KB Financial Group, 3.5%; LG Electronics, 2.2%; Samsung Electronics preferred shares, 2.2%; LG Chemical, 2.2%; Hynix Semiconductor, 2.2%; and Korea Electric Power, 2.1%.

The fund’s industry breakdown is as follows: Information Technology, 28.5%; Financials, 16.0%; Industrials, 14.9%; Materials, 14.0%; Consumer Discretionary, 12.0%; Consumer Staples, 5.0%; Telecommunication Services, 3.4%; Energy, 2.4%; Utilities, 2.4%; and Health Care, 0.5%.

iShares MSCI South Korea Index Fund was launched on May 9, 2000. The exchange-traded fund has an expense ratio of 0.65%.

Cuts to interest rates and taxes, as well as government stimulus spending, are boosting the South Korean economy, which is the fourth largest in Asia.

As well, exports to China are rising. That’s helping offset lower exports to the U.S. and Europe. China is now South Korea’s biggest export market.

A continuing drawback to any South Korean investment is the country’s proximity of North Korea, with its nuclear weapons and seemingly unstable leader. So far, however, his bluster has stopped far short of any serious risk to the south.

iShares MSCI South Korea Index Fund is a buy for aggressive investors.

ISHARES MSCI GERMANY FUND $21.91 (New York Exchange symbol EWG; buy or sell through brokers) is an ETF that aims to track the MSCI Germany Index.

This index aims to replicate the performance of 85% of the total market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership.

The fund’s top holdings are Siemens AG (engineering conglomerate), 9.6%; E.ON AG (energy), 9.4%; Bayer AG (diversified chemicals), 7.4%; Allianz (insurance), 7.1%; BASF (chemicals), 6.9%; Daimler AG (automobiles), 5.0%; SAP AG (software), 5.0%; Deutsche Bank AG, 4.8%; Deutsche Telekom AG, 4.7%; and RWE AG (energy and waste disposal), 4.6%.

The fund’s industry breakdown is as follows: Financials, 19.8%; Industrials, 14.4%; Utilities, 14.2%; Materials, 14.0%; Health Care, 11.6%; Consumer Discretionary, 11.2%; Information Technology, 6.0%; Telecommunication Services, 4.7%; and Consumer Staples, 4.1%.

The fund was launched on March 12, 1996. It has an expense ratio of 0.55%.

Exports account for around 45% of Germany’s economy, so it needs a continued global recovery to sustain its growth. Many European countries are struggling, including Greece, Spain and Portugal, but the German economy is steadily recovering.

iShares MSCI Germany Fund is a buy.

ISHARES MSCI CHILE INVESTABLE MARKET INDEX FUND $57.03 (New York Exchange symbol ECH; buy or sell through brokers), is an ETF that aims to track the MSCI Chile Investable Market Index. This index consists of stocks that are mainly traded on the Santiago Stock Exchange.

The fund’s top holdings are Empresas Copec SA (conglomerate), 13.4%; Enersis AS (electric power), 10.4%; Empresa Nacional de Electricidad (electric power), 9.9%; Empresas CMPC (pulp and paper), 8.9%; Quimiday Minera de Chile (mining), 6.3%; Cencosud SA (retailer), 5.6%; Banco Santander Chile (banking), 4.8%; Lan Airlines SA (Chilean national airline), 4.6%; CAP SA (iron-ore mining and steel), 4.4%; and Colbun SA (electric power), 3.7%.

The fund’s industry breakdown is as follows: Utilities, 27.9%; Materials, 20.5%; Industrials, 20.0%; Consumer Staples, 9.8%; Financials, 9.7%; Consumer Discretionary, 8.0%; Telecommunication Services, 2.6%; Information Technology, 1.0%; and Health Care, 0.3%.

iShares MSCI Chile Investable Market Index Fund was launched on November 12, 2007. The exchange-traded fund has an expense ratio of 0.65%.

Chile is the world’s biggest copper supplier. Asian countries are particularly large consumers of Chilean copper. The country prudently used high copper prices from 2006 to 2008 to pay off its foreign debt and save for an economic downturn. As a result, Chile was able to implement a big economic stimulus plan without taking on debt.

The stimulus measures included public-works projects, tax breaks for businesses and cash distributions to the country’s poorest citizens.

An 8.8-magnitude earthquake hit Chile on February 27. That will hurt the country’s short-term economic growth. As well, Chile’s continuing dependence on resources is somewhat of a drawback to investment in the country. However, the long-term outlook for Chile’s economy remains positive.

iShares MSCI Chile Investable Market Index Fund is a buy for aggressive investors.