Exchange-traded funds that track countries offer two powerful advantages over mainstream equities. First, they let investors reduce exposure to region-specific economic disruptions, like slowing growth and the credit crunch. Second, they increase exposure to profit engines that are much stronger than the U.S. and other crisis-plagued nations.
As an example, the iShares MSCI Mexico Index Fund (EWW) gapped down more than 2% on Friday, after American Movil (AMX - Get Report) reported weak earnings. Consider the sizable trade risk if you didn't know this issue was heavily weighted in the fund, or that it was scheduled to file its quarterly report on Thursday evening.
Realistically, it's a tough chore to keep track of another country's obscure news flow. That's why these world funds work much better as long-term investments. Over time, the underlying equity basket dampens the impact of component-specific shocks, washing out the influence of one-time events such as the American Movil shortfall.OK, let's get down to it. I searched my database over the weekend and pulled up five country-based exchange-traded funds that fulfill two specific criteria. First, they're exhibiting stronger performance than the U.S. indices so far in 2008. Second, recent price action shows the development of lower-risk entry levels for interested investors.
|iShares MSCI Brazil Index (EWZ)|
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