Although it’s not the most exciting investment, these days, you can’t go wrong with the benchmark exchange-traded fund SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Year-to-date, the trust fund is up nearly 16%. However, given its remarkable rally under ever-declining volume, many investors are seeking alternative opportunities. As such, I believe there’s no better time to consider international ETFs to buy than right now.
To borrow a phrase from Jim Cramer, “there’s a bull market somewhere.” So far, we’ve had it good: over the past five years, the SPY is up 87%. While no one’s about to cast dispersions on this run-up, even the most optimistic bull must acknowledge its extraordinary timeframe. All long-in-the-tooth rallies end up fizzling out at some point. Positioning yourself for the next run before it happens is key.
Of course, the big question is, which one? People love international ETFs for the simple reason that the funds often cover the best names in the target nation. That right there gives your portfolio natural hedges should some individual names perform poorly.
Moreover, a basket of international ETFs to buy covers virtually all angles. This strategy helps ensure that you don’t miss the big one, wherever it might occur.
Without further ado, here are five international ETFs to get the best of all worlds!
Admit it: we all love to rag on them from time to time. However, when push comes to shove, we have no greater friend than Canada. Based on our long-standing relationship, Canada is also a natural place to consistently grow your money. While the iShares MSCI Canada Index (ETF) (NYSEARCA:EWC) trails the SPY ETF, the EWC is one of the best “sleeper” international ETFs.
First, the EWC is heavily weighted towards Canadian financial institutions, which is a strong positive. Names like Toronto-Dominion Bank (NYSE:TD) and Royal Bank of Canada (NYSE:RY) are firmly in double-digit territory this year. It helps significantly that Canada’s Prime Minister Justin Trudeau is incredibly popular throughout the globe. He seems quite eager to get deals done for his country, which in turn is great for the big banks.
Second, the EWC features multiple energy companies. Unlike notable American energy firms, their Canadian equivalents have fared better during this cycle of deflated prices. In addition, Canada’s rich natural resources is a natural extension of our broader energy security protocol. Simply put, we benefit and they benefit.
Therefore, when deciding upon which international ETFs to buy, don’t look too far. The EWC is right next door!
When most people think about Argentina, their powerhouse soccer team often comes to mind. But recently, Argentina has shown its prowess in the markets as well. The Global X Funds (NYSEARCA:ARGT) is one of the best performing international ETFs, up nearly 39% YTD. More importantly, the ARGT witnessed a significant boost in trading volume over the past two years.
The increased volume signals that the ARGT won’t turn into a zombie ETF anytime soon. Furthermore, what makes ARGT comparatively distinct is its well-balanced portfolio. Technology, financials, and energy are evenly distributed as the top three sector holdings. It also includes strong positions in consumer non-cyclicals, utilities, and telecommunications. Essentially, anything that moves Argentina will also move the ARGT.
Another reason why you want to keep the South American country on your radar is lithium. In short, Argentina has a massive surplus of the metal of the future, and they want to play ball. That’s great news for tech firms like Tesla Inc (NASDAQ:TSLA), whose products depend heavily on lithium.
If you’re looking for a little speculation on your international ETFs to buy list, consider ARGT!
For those willing to dial up the speculation, the Market Vectors Africa (ETF) (NYSEARCA:AFK) might fit the bill. The AFK ETF is up 19% YTD, which is a good deal more than many western-based funds. However, is that performance enough to justify an investment in a frontier market?
The problem with frontier markets is the lack of stability. As I mentioned in my last write-up about AFK, its lifetime return is terrible at 42.5% down. Having the right thesis doesn’t mean much if you get the timing wrong. Combined with the low trading volume which makes liquidity a concern, the AFK is the very definition of speculative.
However, for investors that can stomach the risk, Africa presents intriguing opportunities. Primarily, the entire continent is a gold mine for virtually every resource that humankind needs. But most critically, multiple African countries are shifting towards modernization.
It’s quite telling that the AFK isn’t saturated with resource-mining stocks. Instead, the ETF’s top sector is financials, and by a very wide margin. Furthermore, the fund has strong positions in telecommunications and technology.
For a high-risk, high-reward opportunity among international ETFs, look no further than the AFK.
No discussion about international ETFs to buy is complete without mentioning Asia. With a population size exceeding 4.5 billion, the majority of the world is Asian. As this trend continues to develop, eastern demands will exert significant pressure on global resources. This makes iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI) a natural buy. Still, I prefer the iShares MSCI Japan ETF (NYSEARCA:EWJ).
In 2015, the Chinese markets soared into an unsustainable bubble, and that bubble popped. Two years later, they’re approaching the same levels again. However, I’m not entirely sure that the problems that led to the first bubble have been resolved.
In Japan’s case, its bubble burst decades ago. Subsequently, multiple Japanese administrations attempted to solve its economic woes, to no avail. However, Prime Minister Shinzo Abe appears to at least have a fighting chance. Since his second term in Japan’s highest office, the EWJ has gained 61%. Prior to Abe, the EWJ merely focused on mitigating losses.
With his recent reelection, Abe gives Japan a level of political consistency that we take for granted. Certainly, the job will not be easy. The Prime Minister is a controversial figure, and he was embroiled this year in a cronyism scandal.
Nevertheless, for EWJ to move higher, it requires at least a pretense of Japanese stability. With Abe at the helm, at least one piece of the puzzle has been solved.
Outside of the Market Vectors Africa fund, the iShares MSCI Poland Investable ETF (NYSEARCA:EPOL) is my most speculative idea. Let me be blunt — relatively few people are scrambling for eastern European opportunities. However, times are changing, and traditional western European powerhouses may no longer carry the same leverage they once did.
I’m chiefly concerned about the lack of stability and the growing loss of core identity. The once-vaunted European Union is beginning to show vulnerabilities, especially with the Brexit fiasco. Most recently, the Catalonia independence movement caused me to issue a cautionary note on Spanish stocks. While European governments speak of unity and open borders, individual citizens seemingly desire a distinct and separate culture.
As such, Poland has a distinct advantage in terms of demographics. Similar to Japan, Poland is extremely homogenous, featuring a 97% ethnic Polish population. Furthermore, more than 87% of its citizens are Catholic. The bottom line is that Poland has a singular mindset devoid of the political drama of its western neighbors.
Will this boost the EPOL ETF? From what we’re seeing, the country is doing something right. The EPOL is up a whopping 46% YTD, making it the best performing international ETF on this list. Don’t be surprised, though, if it continues to add to its gains.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.