Investing Overseas for Double the Payoff

On the equity side, an alternative that MSN Money mutual fund columnist Tim Middleton likes is the exchange-traded fund iShares MSCI EMU Index Fund (EZU). As an ETF, this has the advantage of low annual fees and no redemption fee, but when you buy or sell, you pay the same commission you'd pay on a stock trade.

Third, I'd look to add exposure to Australia, Canada and the export economies of Asia that compete with China. Here you're betting that the Chinese will relax the very strict peg that ties their currency, the yuan, to the U.S. dollar.

The most likely plan would be to let the yuan trade in a range against the dollar. Because most currency exports figure the yuan is undervalued against the dollar, that would result in a modest increase in the value of the yuan.

The biggest effect of such a move, in my opinion, wouldn't be on Chinese stocks, because any appreciation in their dollar-denominated value would be canceled out by an increase in the price of their exports to the U.S.

I'd look to see the biggest currency-related swings in the stocks of those Asian export economies that compete with China. Here I'd target shares in Korea, such as Kookmin Bank (KB), the country's biggest lender.

And I'd look to Taiwan, with an emphasis on liquid big-cap stocks such as Taiwan Semiconductor (TSM). It certainly doesn't hurt that Morgan Stanley Capital International, one of the heavyweights of international indices, will increase the weight of Taiwanese stocks in its benchmark emerging-markets index to 16% from 12% at the end of November. Another bump to 20% is scheduled for June. Index funds that use this popular benchmark will have to buy Taiwanese stocks to keep their portfolios in line.

I have no intention of abandoning stocks in 2005, and that will remain the focus, as always, of Jubak's Journal. I'll do whatever I can to wring gains out of what's likely to be a tricky stock market.

But I would remind you of the fine print that goes along with the stock picks in my columns: I write about stocks, but I expect readers to balance their holdings of equities with other asset classes to build the portfolio best suited to their circumstances. I can't know what that balance might be for any of you. But in 2005, I do think it will pay to add more income assets like these to the mix.

After all, when you're offered a twofer, it makes sense to take it.

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