We believe all Canadian investors should have 20% to 30% of their portfolios in U.S. stocks. However, you can also diversify by adding foreign ETFs in reasonable quantities, perhaps 10% of your holdings if you’re a conservative investor.  The best ETFs offer low management fees and portfolios of high-quality stocks.

Many emerging markets have dropped lately due to a growing U.S. economy and the rising interest rates that push up the U.S. dollar. Nonetheless, the best emerging markets—countries that are home to firms with sound fundamentals—still offer diversification and the potential for above-average returns. We see these two ETFs as buys.

ISHARES INDIA 50 ETF (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) tracks the Nifty 50 index—the 50 largest, most liquid Indian securities. It began trading in November 2009.

The fund’s top holdings are HDFC Bank, 8.4%; Reliance Industries (conglomerate), 8.1%; Housing Development Finance, 7.2%; Infosys (information technology), 6.1%; ITC (conglomerate), 5.4%; Tata Consultancy (information technology), 4.7%, Kotak Mahindra Bank, 4.3%; and ICICI Bank, 4.1%. The fund has a high 0.93% expense ratio.

Along with most emerging markets, this ETF’s unit price has dropped from its all-time high of $39.29 reached in January 2018. The rupee now trades at a two-year low against the U.S. dollar. Still, Prime Minister Narendra Modi’s party continues to push through much-needed economic and political reforms. In July 2017, he successfully introduced a goods and services tax (GST).

The Indian economy’s long-term outlook remains positive. In fact, the economy is the fastest growing in Asia, and could expand as much as 7.5% this year.

Recommendation in Canadian Wealth Advisor: iShares India 50 ETF is a buy.

ETFs: Economy should grow on strong exports and high government spending

ISHARES MSCI SOUTH KOREA INDEX FUND (New York symbol EWY; buy or sell through brokers) aims to track the MSCI Korea Index.

The ETF’s top holding is Samsung Electronics at 22.8%. That’s high, but the firm continues to report strong earnings from its Galaxy phones and computer chips. The fund’s other top stocks are SK Hynix Semiconductor at 6.0%; Posco (steel), 3.1%; KB Financial Group, 2.6%; Naver (Internet), 2.6%; Celltrion (pharmaceuticals), 2.6%; Hyundai Motor, 2.5%; Shinhan Financial, 2.3%; LG Chemical (petrochemicals), 2.1%; and Hyundai Mobis (auto parts), 1.9%.

The iShares MSCI South Korea Index Fund launched on May 9, 2000. Its expense ratio is 0.62%.

South Korea emerged from a period of political turmoil with the May 2017 election of Moon Jae-in as country president.

He became the first liberal leader in nine years, after former president Park Guen-hye was removed from office. She faces a number of criminal charges. The South Korean economy should grow at a rate of 3.5% in 2018, on strong exports and high government spending. The economy should also benefit from an expected rise in visitors from China. Tensions between the two nations—following the U.S. installation of a missile defense system in South Korea—have now eased.

At the same time, though, the trade war between the U.S. and China continues to affect all Asian countries.

Meanwhile, in March 2018, U.S. President Donald Trump met in Singapore with North Korean leader Kim Jong-Un. That marked the first time a serving U.S. president has sat down with the leadership of the diplomatically isolated country. If nothing else, the meeting has helped ease friction between North Korea and the U.S. but also the two Koreas.

Recommendation in Canadian Wealth Advisor: iShares MSCI South Korea Index Fund is a buy for aggressive investors.

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