This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Two Faces of Single-Country Funds

PRESCOTT, AZ (TheStreet) -- In the last 10 years, do-it-yourself investors have become increasingly aware of the importance of foreign investing. The response from the ETF industry has been to create many types of funds that offer many types of exposure, including single-country funds.

iShares dominates the single-country fund space in terms of both number of funds and assets under management. iShares initially bought its way into the segment by acquiring the old World Equity Benchmark Shares, or WEBS, product line from Morgan Stanley; the number of funds available since then has increased significantly.

Constructing a portfolio that includes individual country funds requires two layers of analysis and research. The first layer is what might be expected in terms of a top-down study of the country's fiscal condition, economic stats, what it is that makes the economy of that country tick and any risk factors.

A simple example is the WisdomTree Australia Dividend Fund (AUSE). Australia has a debt-to-GDP ratio of 22%, which is well below the U.S. Its budget deficit was 4.1% last year. The unemployment rate just dropped to 5.2% and the published rate of inflation is a little over 1%. Obviously abundant natural resources is what makes the economy tick; more precisely, global demand for natural resources. The current risk factors would seem to focus on an over-extended housing market.

The role that Australia could play in a diversified portfolio would be to offer exposure to a resource-based economy, which is likely to be at a different point in the economic cycle than a service-based economy like the U.S. This means Australian exposure offers a chance of better portfolio diversification vs. buying another service-based economy like one in Western Europe.

This example is simple, as is the case with many countries. Investors would need to decide whether the attributes and prospects of a given country are compelling enough to include in the portfolio. This process would be undertaken with several countries, maybe more, to build a diversified portfolio.

This can be preferable compared to using a broadly diversified fund like the iShares MSCI EAFE Index Fund (EFA), because that fund has exposure to many unhealthy countries that should be avoided and will likely continue to struggle. These countries include Japan and most of the Eurozone.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,982.59 +22.02 0.13%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs