New International Investing Options

Finally, there are a few new ways to invest outside the U.S. using indexed ETFs.

If you're looking to keep things simple by sticking to a foreign index AND using only a small number of investment vehicles, your options are few. I've used VGTSX, the Vanguard Total International Stock Index (which is simply a mix of 3 Vanguard index funds - a Europe fund, an Asia Pacific fund, and 5% or a bit more of their emerging markets fund) or the EFA ETF (Europe, Far East, and Australia), which has even less emerging markets exposure. By the way - both options have holes: Canada, for instance.

Let's compare and contrast 3 options:

VEU (Vanguard FTSE All World ex-U.S. ETF): This index ETF will cover everything outside the US, including emerging markets. It will have broader coverage than Vanguard's Total International Stock Index fund, which has over 2000 stocks. It will have a 0.25% expense ratio. No country breakdown is available yet.

CWI (State Street All Country World Index ex-U.S. ETF): This is another recently established all-world index. It has around 2000 stocks, has a 0.35% expense ratio (same as EFA), should yield about 2.5% (EFA yields 2.1%) and has about 13% in emerging markets. That's a pretty good percentage; it will be interesting to see if the Vanguard ETF has that much in emerging markets.

DTH (WisdomTree DIEFA High Yielding Equity Index ETF): WisdomTree released a slew of ETFs over the last year or so based on proprietary indexes. Their theory is that basing indexes on dividend yields can yield good growth; this theory has held water in the U.S. market since forever. This ETF will not have as much emerging markets exposure as CWI.

VEU and CWI could both be considered core portfolio holdings. I've added all 3 options to the Sectors page. There are no 2006 results for these investments, since they are brand new.