Topic: ETFs

Two international ETFs offer timely diversification for Canadian investors

international etfs

Today, we look at two exchange-traded funds (ETFs) that can help investors achieve greater diversification. As well as holding up to 25% of their portfolios in U.S. stocks, we believe Canadian investors can benefit from holding as much as 10% in international stocks. ETFs offer a relatively safe way to do this. While we see several overseas ETFs we follow as holds in a slow global economy, we continue to view these two international ETFs as buys, although for more aggressive investors.

For a recent article on Canadian ETFs we recommend, read Most of Canada’s best stocks are in these two ETFs. And for our overall view on the best way to profit in the expanding field of exchange-traded funds, read When you invest in ETFs, keep it simple.

We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus.

The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of high quality stocks.

Here’s a look at two international ETFs:

ISHARES MSCI EMERGING MARKETS INDEX FUND (New York symbol EEM; buy or sell through brokers; ) aims to track the MSCI Emerging Markets Index.

The fund’s geographic breakdown includes China, 23.0%; South Korea, 14.7%; Taiwan, 12.3%; India, 8.4%; South Africa, 8.1%; Brazil, 6.9%; Mexico, 4.8%; Russia, 3.9%; Malaysia, 3.1%; Indonesia, 2.4%; Thailand, 2.2%; and Poland, 1.6%.

Its top holdings are Samsung Electronics (South Korea), 3.0%; Taiwan Semiconductor (computer chips), 2.8%; Tencent Holdings (China: Internet), 2.5%; China Mobile, 2.1%; China Construction Bank, 1.7%; Naspers (South Africa: media and Internet), 1.5%; Industrial & Commercial Bank of China, 1.3%; Bank of China, 1.1%; and Hon Hai Precision Industry (Taiwan), 1.1%.

The ETF was launched on April 7, 2003. Its expense ratio is 0.68%.

Emerging markets are still more volatile and vulnerable to downturns than developed nations, but this fund’s broad diversification among these countries tones down its risk.

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

Recommendation in Canadian Wealth Advisor: BUY for aggressive investors

Smart conservative investing at a time of uncertainty

Pat McKeough’s approach to smart conservative investing gives you two big advantages. Your investments are safer when the market is down—and you’re in a stronger position to profit when the markets move up.

Pat’s safety-first philosophy is simple and always effective. It is built on the investments conservative investors need to succeed—established dividend-paying stocks, the most reliable exchange-traded funds (ETFs) and Canada’s best Real Estate Investment Trusts (REITs).

Learn more  >>

ETFs: Rebounding shipments to U.S. help offset weaknesses elsewhere for South Korean economy

ISHARES MSCI SOUTH KOREA INDEX FUND (New York symbol EWY; buy or sell through brokers) aims to track the MSCI Korea Index.

The ETF’s top holdings are Samsung Electronics, 19.1%; Hyundai Motor, 3.8%; SK Hynix Semiconductor, 3.7%; Shinhan Financial, 3.0%; KB Financial, 2.4%; Hyundai Mobis (auto parts), 2.4%; Naver (Internet), 2.4%; Korea Electric Power, 2.2%; Kia Motors, 2.2%; Posco (steel), 2.2%; Korea Electric Power, 2.2%; KT&G Corp. (tobacco), 2.0%; and AmorePacific Corp. (cosmetics), 2.0%;

The iShares MSCI South Korea Index Fund was launched on May 9, 2000. Its expense ratio is 0.62%.

South Korea has Asia’s fourth-largest economy, after China, Japan and India. It is heavily reliant on exports, but shipments to the U.S. are rebounding, offsetting weakness in Europe and China.

The steady rise of South Korea’s currency, the won, hurt its economy in 2012 and 2013 by making its goods more expensive for foreign buyers. But South Korea has cut interest rates to record lows, bringing the won back down to five-year lows against the U.S. dollar and boosting exports.

In the longer term, the country faces an aging population, with a birth rate of 1.2 children per woman, the lowest in the developed world.

South Korea’s economy will likely grow by 2.8% this year, down from an earlier forecast of 3.1%.

That’s mostly due to an outbreak of Middle East respiratory syndrome that began in May. Since then, MERS has killed at least 36 Koreans and kept many shoppers and tourists at home.

Still, the country’s economic growth is forecast to rise as high as 3.3% in 2016, and low oil prices could push that forecast higher: South Korea imports almost all of its oil, bringing in the fifth-largest amount in the world, after Germany.

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

Recommendation in Canadian Wealth Advisor: BUY for aggressive investors

Do you own foreign stocks in any form? Or do you stick to Canadian stocks?


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