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Mexico ETF Worth Keeping on Radar

On the contrary, the instrument's heavy dedication to its top three holdings leaves it vulnerable to upheaval. Investors looking to set aside a portion of their portfolio for EWW must be careful to avoid becoming overexposed.

A Mexican equity-tracking ETF like EWW is not the only way to target the nation's economy. It will likely witness some volatile action in the months ahead, but aggressive investors may also want to keep their eye on the peso. Recently, this currency player has seen some impressive strength. The Wall Street Journal noted on Tuesday that it climbed to its highest level against the greenback in three weeks.

Like other emerging market currencies, continued strength from the peso will likely depend heavily on global growth prospects in the developing world. At the same time, analysts note that resurgence in U.S. economic strength could push the currency higher as well.

The CurrencyShares Mexican Peso Trust (FXM) is designed to allow investors to track the peso's action. For now, the best way to follow FXM is from the sidelines; with an average trading volume barely breaking 10,000 it is susceptible to liquidity-related issues.

For many, turning over to a new calendar year may feel like a refreshing reset. From an investment perspective, though, the opening weeks of 2012 should be viewed no differently than the closing days of 2011. Rather than trying to game every market swing, investors should be focused on building a portfolio that can withstand future choppiness. In small doses EWW should help to achieve this task.

Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management owned the iShares MSCI Mexico Investable Market Index Fund.
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