The 101 in Global ETF’s
Exchange-traded funds or ETF’s have become very popular within the last 20 years. One of the biggest benefits to these funds are diversification. For the younger generation, ETF’s don’t only allow you to purchase shares in a company, they provide a pipeline of different commodities and bonds at your fingertips. Despite the infamous mutual funds high fees, ETF’s are usually much lower. This provides a larger profit margin in the long run.
Some of my favorite Global ETF’s include (FXI) China, (EWP) Spain, and (EWZ) Brazil. Taking the endeavor into the ETF market is more technical and risky. Instead of looking at sector trends, quarterly earnings, and past data on a given stock, ETF’s require a lot more scrutiny and research. For example, Brazil (EWZ), is one of the worlds largest exporters of coffee beans which is responsible for much of their economy. So for (EWZ) not only do you need to look into the commodity of coffee beans, but you also have to look at all of the other assets and liabilities Brazil offers. Brazil has a Year To Date Return of 11% and allocates a 3.2 percent yield to investors. iShares MSCI Brazil Capped (EWZ) is a fund that invests in Brazil while only keeping 5% of their portfolio liquid, a more risky ETF.
China (FXI) has a current Year to Date return of 7%. One of the strongest economical countries in the world, (FXI) gives a young investors portfolio longterm growth as well as diversity from the already held U.S. stocks in their portfolio. In the second quarter, China’s economy hit a better than expected 7.5%. Retail sales are up more than 12% and industrial production rose 9%. China specializes in exportation which needs to continue in order to see growth. iShare China Large-Cap (FXI) focus on companies that fall on the Hong Kong Stock Exchange and shoot to keep almost 90% of their assets in securities.
Spain (EWP) has a 7% Year To Date with strong signs of continuous growth. Investors confidence is beginning to strengthen due to a rating upgrade by Moody’s, Standard & Poor’s , and Fitch. Yields are also falling in Spain, specifically the 10-year which shows confidence. Bonds have also fallen to their record lows. As well as the increasing share price, (EWP) also has a yield of 2.8%.
These three countries, I believe, have the largest potential growth for your longterm portfolio. The implementation of any ETF, not matter if its a country like (IFN) India or a commodity like (BAL) cotton or (CORN) corn, it is crucial for diversification. ETF’s are also beneficial for security and less risk. Almost like mutual funds, ETF’s like iShares MSCI Brazil Capped (EWZ) invest in the economy, but diversify in the sectors markets. ETF’s don’t necessarily react to a certain company, but the market in general.