International ETFs

Dynamic Wealth Report
October 24, 2007

These days, you can’t turn around without bumping into some product from overseas.  The automobiles we drive are imports, the computers and cell phones we use are made in Asia, and our children’s toys are from China.  We are now eating food from around the globe, gourmet chocolates from Belgium, sea salt from France, oranges from South America.  The list is endless.

While this is a great benefit to our consumer oriented habits, we also face the risks of dealing in societies where health and safety regulations are disregarded or non-existent.  Shortly after the toy recalls that occurred earlier this year, several of my family members indicated a desire to purchase toys that were not made in China.

Good intentions, but impractical.

They quickly discovered that almost every toy in a modern day toy store is made in China.  Cost of assembly and production is lower there, and the outsourcing trends that swept the nation over the last decade have pushed most manufacturing overseas.  Chinese goods are now pushed on us, whether we want them or not.

While purchasing goods from every international source is one way to truly achieve international exposure, in your financial portfolio there are better ways.

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Emerging markets have been on a tear lately.  The middle class in these markets is growing rapidly.  This is creating economic prosperity, and making for some very interesting investment opportunities. While selecting international stocks for big growth is a great idea, for the modern American investor, sometimes this is not very practical.

When I was working in Europe, it was not uncommon for many of my colleges to buy stocks in emerging markets around the globe.  The world was open to them and their ability to buy global equities was unhindered.

Unfortunately, the same is not true here in the United States.  Government regulations and an unfortunate fear by many brokers limit our ability to purchase stocks on international exchanges.  So how do we still get the international exposure we need?

I am inherently biased against the use of international mutual funds, as their actively managed portfolio style limits my knowledge of what they own.  In addition, their lack of intraday trading limits my ability to use advanced investment strategies to grow my returns.

What are our other options?  My preference is to look to ETFs that mirror the emerging markets in the countries where we would like to invest.

Some of the largest creators of ETFs have come to our rescue, creating securities that are traded on the US markets, which provide us with the exposure we need, and also give us intraday trading.

Next week, we will look at some of these international ETFs and discuss their use.

•  Oil (New high of over $90)

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