It used to be that investing was pretty simple. You bought a few blue chips, some U.S. Treasury bonds and took a long nap. Where to invest money had one simple answer: Here, at home.
Fast forward a few decades and now even the once-exotic idea of foreign investing is commonplace. For retirement investors, this is a huge step forward. Global investment opportunities really matter for long-term retirement portfolios.
The good news is that knowing where to invest money is not a matter of getting tips from experts abroad or even having a smattering of high-school Spanish. It’s really about spreading your money near and far.
How? By using broad exchange-traded funds (ETFs) that capture whole regions of the world and whole markets. There are risks, of course, but ETFs diminish those risks by pooling investable companies into simple tickers you can buy and sell safely through your trusted brokerage.
Exactly which ETFs is not so important, but here are some quick illustrations of what I am talking about. You want widely held, liquid, inexpensive funds that capture the major players abroad. Some of those are:
Vanguard FTSE Emerging Markets ETF (VWO): Investing in the common stocks of the FTSE Emerging Index. Holdings include China Mobile, Taiwan Semiconductor Manufacturing and America Movil.
SPDR S&P Emerging Markets Small Cap (EWX): Seeking to track the performance of the S&P Emerging Markets Under $2 Billion Index. Here’ll you find smaller, faster-growth firms such as Glenmark Pharmaceuticals and Datatec Ltd.
iShares MSCI EAFE Growth (EFG): Seeks investment results that correspond to the MSCI EAFE Growth Index. This is Nestle, Roche and Toyota, among other major names.
iShares MSCI EAFE Value (EFV): Corresponds to the MSCI EAFE Value Index, that is, firms that appear to have declined in price and might now represent an opportunity. Recent holdings include HSBC Holdings, Vodafone and Novartis.
iShares MSCI EAFE Small-Cap (SCZ): Tracks the performance of the MSCI EAFE Small Cap Index. Companies include Nippon Kayaku, Symrise and Valeo.
Are these the “best” ETFs out there for foreign investing? No, but they are good and representative of the types of funds you should be looking to buy to build your own global retirement portfolio.