International Diversification
I've been reading a lot about diversification lately and its effect on performance and risk. More articles to come, but the bottom line is that diversification is good for your portfolio.
What this means, however, is that you need to diversify your international investment and not just your domestic investment. To this point, my international investment has consisted of 2 large indexes: Vanguard's Total International Stock Index and EFA, an ETF that tracks the MCSI Europe, Australia, and Far East (developed markets) index.
So how do you diversify your international investment? I'm not in the mood for managed mutual funds, and I certainly don't want to pick individual stocks (the individual stocks I still hold, like Johnson and Johnson and Coca Cola, do make significant portions of their revenue and profit abroad). Vanguard only has broad based international funds: VGTSX and the Vanguard International Value fund (useful for diversification into value stocks).
Options are finally starting to arrive. Here are a few:
EFV (EFA value index, subset of EFA): 0.4% expense ratio. $1b in assets. P/E ratio of about 15.65. Top 3 sectors: 41.98% financials, 10.43% consumer discretionary, 10.23% energy. Top 3 countries: 23.39% Japan, 21.99% U.K., 9.1% France.
EFG (EFA growth index, subset of EFA): 0.4% expense ratio. $483b in assets. P/E ration of about 22.55. Top 3 sectors: 17.03% financials, 14.65% industrials, 13% consumer discretionary. Top 3 countries: 24.12% U.K., 21.19% Japan, 9.9% France .
DLS: Expense ratio of 0.58%. $464m in assets. Top 3 sectors: 27.95% industrials, 17.25% consumer cyclical (discretionary), 17.09% consumer non-cyclical (staples). Top 3 countries: 22.97% U.K., 19.31% Austrialia, 15.45% Japan.
GWX: Expense ration of 0.6%. P/E ratio of about 18. Stocks with < $2b market cap in any country but the U.S. Top 3 sectors: 25.45% industrials, 19.01% consumer discretionary, 18.18% financials. Top 3 countries: 25.59% Japan, 13.42% U.K., 10.76% Canada.
Here's an article on WHY you want international investments. I believe the dollar isn't going to be top dog in the world currency markets forever; that means U.S. economic and stock market growth will start to lag that of international markets that are growing faster.
Here's a Marketwatch article on the new small cap international ETFs.
What this means, however, is that you need to diversify your international investment and not just your domestic investment. To this point, my international investment has consisted of 2 large indexes: Vanguard's Total International Stock Index and EFA, an ETF that tracks the MCSI Europe, Australia, and Far East (developed markets) index.
So how do you diversify your international investment? I'm not in the mood for managed mutual funds, and I certainly don't want to pick individual stocks (the individual stocks I still hold, like Johnson and Johnson and Coca Cola, do make significant portions of their revenue and profit abroad). Vanguard only has broad based international funds: VGTSX and the Vanguard International Value fund (useful for diversification into value stocks).
Options are finally starting to arrive. Here are a few:
EFV (EFA value index, subset of EFA): 0.4% expense ratio. $1b in assets. P/E ratio of about 15.65. Top 3 sectors: 41.98% financials, 10.43% consumer discretionary, 10.23% energy. Top 3 countries: 23.39% Japan, 21.99% U.K., 9.1% France.
EFG (EFA growth index, subset of EFA): 0.4% expense ratio. $483b in assets. P/E ration of about 22.55. Top 3 sectors: 17.03% financials, 14.65% industrials, 13% consumer discretionary. Top 3 countries: 24.12% U.K., 21.19% Japan, 9.9% France .
DLS: Expense ratio of 0.58%. $464m in assets. Top 3 sectors: 27.95% industrials, 17.25% consumer cyclical (discretionary), 17.09% consumer non-cyclical (staples). Top 3 countries: 22.97% U.K., 19.31% Austrialia, 15.45% Japan.
GWX: Expense ration of 0.6%. P/E ratio of about 18. Stocks with < $2b market cap in any country but the U.S. Top 3 sectors: 25.45% industrials, 19.01% consumer discretionary, 18.18% financials. Top 3 countries: 25.59% Japan, 13.42% U.K., 10.76% Canada.
Here's an article on WHY you want international investments. I believe the dollar isn't going to be top dog in the world currency markets forever; that means U.S. economic and stock market growth will start to lag that of international markets that are growing faster.
Here's a Marketwatch article on the new small cap international ETFs.
Labels: diversification, international
posted by Stephen Drone at
12:40 PM
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