This Day On The Street
Continue to site
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

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NORW $10.86 0.93%
AUSE $49.44 1.50%
EFA $58.43 -0.43%
EWS $10.87 -1.00%
STO $17.59 -0.11%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs