We think most conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus.
The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of high-quality stocks. Today we examine two international ETFs covered regularly in Canadian Wealth Advisor.
ISHARES MSCI CHILE INVESTABLE MARKET INDEX FUND (New York Exchange symbol ECH; ca.ishares.com) is an ETF that aims to track the MSCI Chile Investable Market Index, which consists of stocks that mainly trade on the Santiago Stock Exchange.
The fund’s top holdings are S.A.C.I. Falabella (retail), 9.0%; Enersis SA (electricity), 8.8%; Empresas Copec SA (conglomerate), 8.5%; LATAM Airlines, 6.9%; Empresa Nacional de Electricidad (electricity), 6.7%; Cencosud SA (retailer), 5.2%; Banco Santander Chile (banking), 4.7%; Quimica y Minera de Chile (mining), 4.5%; Banco de Chile, 4.4%; and Empresas CMPC (pulp and paper), 4.0%.
The fund’s industry breakdown is: Utilities, 25.0%; Financials, 17.3%; Materials, 13.7%; Consumer Discretionary, 10.6%; Industrials, 9.9%; Consumer Staples, 9.9%; Energy, 8.5%; Telecommunications, 2.4%; and Information Technology, 2.0%.
iShares MSCI Chile Investable Market Index Fund was launched on November 12, 2007. It has an expense ratio of 0.62%.
Chile is the world’s biggest copper producer, and a major supplier to Asian markets.
Handful of major stocks looms large in Brazil Index Fund
ISHARES MSCI BRAZIL INDEX FUND (New York Exchange symbol EWZ; ca.ishares.com) is an ETF that is designed to track the Brazilian stock market.
Its top holdings are Petrobras (oil and gas), 10.3%; Cia Itau Unibanco Holding (banking), 8.7%; Vale do Rio Doce (mining), 8.1%; Cia de Bebidas das Americas (beer and beverages), 7.6%; Banco Brandesco, 6.4%; and BRF SA (food), 3.5%.
The ETF was launched on July 10, 2000. It has an expense ratio of 0.62%.
The fund’s resource focus and concentration in certain stocks, such as Petrobras and Vale do Rio Doce, add risk, but both are high-quality stocks.
In the latest issue of Canadian Wealth Advisor, we look at the long-term outlook for the Chilean economy in light of its heavy dependence on resources. We also consider the pace of Brazil’s economic growth in the face of sluggish exports and low resource prices. We conclude with our clear buy-hold-sell advice on both of these exchange-traded funds.
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When you invest in foreign stocks, do you have a preference between strong industrial countries like Germany and Japan and resource-heavy nations like Chile and Brazil? Have you cut back on foreign investments in the past few years as the global economy has slowed down? Do you believe Canadian investors will add more foreign investments as emerging economies continue to grab a larger share of the global economy in the years ahead?
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