This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today’s article is by David Allen, a portfolio manager at Walnut Creek, California-based Accuvest Global Advisors.
As part of my work in the advisory and brokerage space, I get a chance to meet with teams from all around the country, with all different types of practices.
One of the more common comments I hear from advisors/teams in the U.S. is that they feel they have a good methodology for investing in domestic securities, but when it comes to international investments, they “just use the EAFE [index].”
The reason most advisors take this route has to do with the simplicity and the belief that they are buying a single product that will give them diversified exposure to the international markets.
Unfortunately, what the majority of investors don’t realize is that roughly 80% of the index is in the top six countries, and there is no exposure to emerging markets.
My suggestion for them is to take the time to assess those top six countries, and then invest in the ETFs of the ones they actually want to be invested in. Those countries can be easily paired with an emerging market ETF to round out the international part of the portfolio. The end result will be a more thoughtful exposure that clients will actually understand better.