Investors are always looking for ways to increase their exposure to markets and take advantage of profitable opportunities. Global investing is an option if you are looking to bear a little risk.
Asset and Market Investment
International investing allows investors to diversify their investments based on geographical region. They can increase or decrease their exposure to emerging, fixed, or growing foreign investment types. Foreign exchange-traded funds (ETFs) are effective assets. They are good assets for your portfolio and provide you with instant access to invest in foreign markets.
Ways to Invest in Foreign Markets Using Exchange-Traded Funds (ETFs)
You can use six types of international exchange-traded funds to diversify and increase your portfolio.
Exchange-Traded Funds for Specific Foreign Markets
Exchange-traded funds for specific foreign markets may be the best option if you want to target a particular country in your plan. These ETFs track the financial conditions of a country through an index from that country’s stock exchange.
It is essential to ensure that the market you choose is politically stable. Civil unrest is one factor that can close the market and cause prices to drop.
An example of a specific foreign market ETF is the iShares MSCI Germany Index ETF (EWG), which tracks the MSCI Germany Index. The index includes companies in German sectors such as information technology, public utilities, and finance. A significant change in the index or trends on the index reflects the financial condition of the economy.
It is possible to invest in the index by buying stocks yourself, but ETFs offer benefits compared to direct investment, such as low trading fees and some tax advantages.
Broad Foreign Market Exchange-Traded Funds
Some ETFs focus on a specific country or region, while others are more comprehensive. BRIC investment includes securities derived from Brazil, Russia, India, and China. A BRIC ETF like the iShares MSCI BRIC Index ETF (BKF) is one way to invest if you want to invest in one or more of these countries.
There are other broad-based index funds in addition to BRIC products. These include Asian index funds, European index funds, and even North American and Latin American index funds.
Emerging Market Exchange-Traded Funds
Emerging market exchange-traded funds are funds invested in securities from countries with growth potential. These countries are characterized by low income and rapid social changes. Countries deemed emerging are listed in the Morgan Stanley Capital International Emerging Markets Index (MSCI).
Similar to foreign exchange-traded funds, emerging market ETFs offer a wide range of markets to choose from. An emerging market ETF can be a good investment if you believe there is a profit opportunity in a specific country or general region.
An example of an emerging market ETF is the Global X MSCI Colombia ETF (GXG). You can also choose a broad-based emerging market fund that tracks most emerging countries, such as the iShares Core MSCI Emerging Markets ETF (IEMG).
International Bond Exchange-Traded Funds
Another way to invest in foreign markets is through international bond exchange-traded funds. Bond ETFs not only increase your exposure to foreign areas but can also create a steady income stream for your portfolio.
The advantage of international bond funds for global investors is that they can help hedge against the risks of foreign equity funds. You may want to consider foreign bond funds if you need protection against global equity risks in your portfolio.
Foreign Currency Exchange-Traded Funds
Similar to other foreign exchange-traded funds, currency ETFs can track a country or a group of currencies. However, investing in foreign currencies is known to be risky. Currency ETFs can mitigate a large part of this risk if the investor has more assets based on their own country, reducing exchange rate risk.
From
It is useful to know the risks for successful currency investment, such as sovereign bankruptcy, GDP rate, unemployment rates, corruption, natural resources, and other economic factors. The CIA World Factbook provides relevant data for over 255 countries.
Long-term bonds carry inflation risks, so currency exchange-traded funds allow you to protect your portfolio from foreign inflation risks.
Commodity Exchange-Traded Funds
Most investors believe that commodities are general or local investments, but this is not the case. Like foreign exchange-traded funds, you can use a commodity exchange-traded fund to gain global exposure or hedge against foreign risks in your portfolio.
You can use a coal exchange-traded fund to offset risks from other investments in a country where coal is the primary energy source. A solar energy fund may pay dividends globally if there is a country developing alternative energy sources to address an energy crisis.
Using a commodity exchange-traded fund as a foreign investment is an advanced approach, but it can be very effective for both investors and traders with the proper application.
Source: https://www.thebalancemoney.com/how-to-invest-in-foreign-markets-with-etfs-1215146
Leave a Reply