ETFs: The Way to Get Country Diversification

The investment world seems to be coming to grips with the notion that U.S. investors need more foreign exposure. That idea was corroborated in a recent Barron's story in which Charles Schwab said holding 40% of your assets in foreign holdings might be good for some people.

Companies have been selling ever-more exchange traded funds, providing broad and narrow exposures to the world, countries and themes with a global focus. Toward the end of the article, however, the advice goes way off course. There is a quote from a research director at a large bank saying investors "can get the majority of benefits from the emerging-markets space by using broader multi-country products," the idea being that single-country funds can be too risky for people with "longer-term goals."

Before following that sort of advice, it's important to understand the drawbacks, the biggest of which is that there may not actually be that much diversification in these funds. ...