Foreign ETF Ideas That Can Prevent Domestic Overexposure

Over-exposure to domestic markets and ETF may be detrimental during times such as these.

On average, American investors have anywhere from 2%-20% exposure in foreign markets. This can prove dangerous for a few reasons.

Tim Hanson for The Motley Fool says that this leaves you too vulnerable to the slowing in the United States’ economy. Declining home values, a weaker dollar and a beat up portfolio are not a good mix.

Second, when you ignore foreign markets, you’re all but assuring that you are going to miss out on the greatest economic growth forecast to come in the next 10 to 15 years. From a growth standpoint, China, India, Brazil and even Vietnam and Mexico have more potential going forward.

While growth has slowed or even reversed course in most markets in the world, domestic and global, this won’t always be the case. Valuations on emerging markets may be looking ripe in the near future.

Foreign markets have been beat up along with everyone else. Some might take longer to recover, while others may bounce back nicely. Be sure to have a strategy in place before jumping back into the market. The 50-day moving average is a good place to start, and moving incrementally instead of all at once will give you more control.

• PowerShares BLDRS Asia 50 ADR Index Fund (ADRA): down 51.3% year-to-date

• Vanguard European (VGK): down 49.8% year-to-date

Comments

[k45:]

We've been hearing the mantra that one "must be invested in foreign markets" for years now. Personally, I'm glad I missed the MINUS 51 percent "gains" this year.

No, I'm not against foreign investments. But they too have their bubbles which typically are worse than the U.S. markets and they are harder to analyze intelligently.

The large multinational corporations are perhaps a better way to invest in foreign markets since they are better equipped to understand the real issues going on, plus have better transparency in accounting and reporting.

2008 Dec 08 01:00 PM

[fran:]

i've been in, then out, from 2004 thru 2007, both stocks and etfs. very profitable. but like stocks anywhere, diligence and diversification are required. so is adherence to "RULE ONE".

i'm back into selected world wide stocks and etfs at today's lows. will these go lower? undoubtedly. but in years higher, yes. the world is full of value and of risk. not just the americas.


On Dec 08 01:00 PM k45 wrote:

> We've been hearing the mantra that one "must be invested in foreign
> markets" for years now. Personally, I'm glad I missed the MINUS 51
> percent "gains" this year.
>
> No, I'm not against foreign investments. But they too have their
> bubbles which typically are worse than the U.S. markets and they
> are harder to analyze intelligently.
>
> The large multinational corporations are perhaps a better way to
> invest in foreign markets since they are better equipped to understand
> the real issues going on, plus have better transparency in accounting
> and reporting.

2008 Dec 08 06:20 PM