Who said developed-world equities are in the dumps? You just haven’t looked closely enough at ETFs canvassing single countries, such as
Investing outside of the
For example, what makes
This year, the
Neighbor To The North
One of the most overlooked investment opportunities in the
The iShares MSCI Canada ETF (NYSEArca: EWC) is composed of 101 stocks that are based in
The Canadian ETF is an attractive complement to
The best-performing developed-country ETF is the iShares MSCI Sweden ETF (NYSEArca: EWD), with a year-to-date gain of 9 percent. The Scandinavian country best known for their beautiful people and meatballs also has a thriving technology sector. With 20 percent of the ETF invested in technology stocks, the fund is poised to take advantage of more high-tech growth.
The two largest sectors are financials and industrials, making up 27 percent each. The only concerns I have with EWD are that the top 10 holdings make up 63 percent of the portfolio and there are only 33 stocks in the entire ETF. Also, a third of the ETF is allocated to the top three holdings. But, what it lacks in diversification, it makes up for with performance.
The Neutral Investment
The iShares MSCI Switzerland ETF (NYSEArca: EWL) is up slightly this year, but has rallied 18 percent from the low in late May. During the same time frame, the Rydex CurrencyShares Swiss Franc Trust (NYSEArca: FXF) is up 15 percent and the S&P 500 is up a measly 2 percent.
The ETF is heavily concentrated in its top holding, Nestle, which makes up 21 percent of the allocation. The top 10 holdings account for 74 percent of the ETF and the security has a total of 38 stocks. The Swiss are often viewed as a neutral territory, and the Swiss franc and Swiss markets in general are often considered safe havens during times of turmoil.
Diversification Is The Key
Each year there will be winners and losers in the world of single-country ETFs. The three I mentioned above just happen to be on top this year, but may not be there in 2011. That’s why it’s imperative to build a diversified portfolio of developed-country ETFs when investing in the asset class.
I’m not suggesting an investor move completely out of the
Matthew D. McCall is editor of The ETF Bulletin and president of Penn Financial Group LLC, a Ridgewood, N.J.-based wealth management firm specializing in investment strategies using ETFs.