Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away.

Today’s tip: “The top 3 ways to earn higher profits in world stock market investing”

High-quality foreign stocks are a great way to diversify your portfolio. Moreover, many fast-growing markets, like China and India, have positive outlooks. That’s because their people are generally younger than North Americans, and rising incomes are helping more of them advance into the middle class.

Even so, world stock market investing remains riskier than investing in North America. That’s because many emerging countries have language barriers, weak investor-protection laws, less commitment to openness, fairness and so on.

Here are the top 3 ways to tap into world stock market profits at lower risk:

1. International exchange-traded funds (ETFs): Exchange-traded funds offer investors more benefits than ever before, mainly because of increased competition. That can make ETFs good choices for certain parts of your portfolio — such as the portion you devote to world stock market investing.
   
   Exchange-traded funds mirror the performance of a stock-market index or sub-index. They hold a more-or-less fixed selection of securities that are chosen to represent the holdings that go into the calculation of the index or sub-index.
   
   Exchange-traded funds trade on stock exchanges, just like stocks. Investors can buy them on margin or sell them short. The best exchange-traded funds offer well-diversified, tax-efficient portfolios with exceptionally low management fees. They are also very liquid.
   
   A good example of an international exchange-traded fund is iShares MSCI Japan Index Fund (symbol EWJ on New York), which we analyze in the latest issue of our Canadian Wealth Advisor newsletter. This ETF has slipped in the wake of the Japanese tsunami/earthquake/nuclear disaster. In the latest Canadian Wealth Advisor, we look to see if its outlook remains negative, or if it’s well-positioned to gain as the Japanese government spends heavily to rebuild the areas affected by the disaster.

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2. Blue-chip U.S. companies: A simple way to gain international exposure at lower risk is to invest in U.S. stocks. We advise keeping around 25% of your portfolio in U.S. stocks. That’s because many blue-chip U.S. stocks have operations in fast-growing foreign countries. This lets them benefit from a recovering global economy, as well as a return to prosperity in the U.S.
   
   With the Canadian dollar now above parity with the U.S. dollar, there’s never been a better time to add high-quality, multinational U.S. stocks to your portfolio. If you’re a conservative investor, you can choose from the companies we recommend in our Wall Street Stock Forecaster newsletter’s Conservative Growth Portfolio.
3. New York American Depositary Receipts (ADRs): An American Depositary Receipt is an investment unit for foreign companies that trade on a U.S. stock market. These units can represent fractions of shares, whole shares, or multiple shares in the foreign company. ADRs can help you simplify your international investing by letting you buy foreign shares on U.S. exchanges without the complications of buying or selling on a foreign exchange, in a foreign currency.
   
   These investments also help you cut risk, because American Depositary Receipts have to follow some U.S. Securities and Exchange Commission and New York Stock Exchange rules. Two examples of firms that trade as ADRs are Honda Motor Co. (symbol HMC on New York), and Switzerland-based ABB Ltd. (symbol ABB on New York), which makes transformers, transmission switches and other equipment for distributing electricity. We analyze both companies in Wall Street Stock Forecaster.

Next Wednesday, April 20, 2011, Investor Toolkit will give you our advice on how to know the right level of investment risk for you.

You can get our full analysis of dozens of high-quality companies in the fast-changing U.S. market (including international firms that trade as New York ADRs) in our Wall Street Stock Forecaster newsletter. What’s more, you can get the latest issue absolutely free when you subscribe today. Click here to learn how.