How to Invest in the World

Taking a more global perspective when investing is a crucial strategy that pays off for long-term investors.

glass globe on stock chart

One very common investing misperception that I have heard frequently is the idea that it doesn’t matter where in the world you invest because markets always move together.

This couldn’t be further from the truth. Regions and country stock markets often move to the beat of their own drummer based on any number of factors, from economic growth to political events and perceptions of risk. Taking a more global perspective is a strategy that can truly pay off over time.

One easy strategy to capture global opportunities is through a country ETF rotation portfolio. Almost every major and emerging market country you can think of has an exchange-traded fund (ETF). Here are just a few.

How to Invest in the World
New Zealand (ENZL)
Switzerland (EWL)
Italy (EWI)
United Kingdom (EWU)
Philippines (EPHE)
Turkey (TUR)
Brazil (EWZ)
India (INP)
Argentina (ARGT)
China (FXI)

Why would some of these markets be doing better than China? It’s simple: they are competitors to China.

Because of higher costs in China, production is going to other markets in the region. Trade and investment within Southeast Asian countries is also rapidly increasing. During the last decade foreign direct investment between these countries has more than tripled. I could go on with other examples, but you get the point. What country’s markets and, in turn, what stocks you invest in makes a tremendous difference in performance.

2 Country-Specific ETFs with Value and Momentum
I have learned over time that the best strategy for picking country ETFs is to look at the extremes of value and momentum.

On the momentum side I would look at Taiwan (EWT), a market that is up 21% in 2021 and up 68% in the last year. This ETF’s largest holding, at 20% of assets, is Taiwan Semiconductor (TSM), which is the dominant producer of high performance microchips in the world. With a global semiconductor shortage making headlines, this stock should outperform. Many of the Taiwan ETF’s other holdings are in high tech and finance.

On the value side, despite all the corruption and political meddling in the Russian economy, its stock market, and the Russia ETF (RSX), is dirt cheap. Second, Russia, as a Pacific Rim nation, is stepping up its trade and investment outreach to countries such as China, South Korea and Japan. In fact, over the past five years, Russia’s bilateral trade with Japan has already doubled and trade with South Korea has tripled. These trends will accelerate as the Pacific century unfolds.

In addition to ample supply of energy resources, Russia has geography on its side. It takes only 2-4 days to get raw materials from Russia’s Asian frontier to China compared to weeks for many of its competitors. Finally, despite the bad headlines, the Russian economy is chugging along pretty well with about a 4% growth rate.

So don’t be lulled to sleep by the myth that all markets move in tandem. Be alert for the country opportunities showing great value or momentum.

Have you ever invested in country-specific ETFs?

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