Investing Abroad? Consider an International ETF

If you are considering investing abroad, international ETFs may provide you with a simple and diverse way to accomplish this task. An international ETF provides you with exposure to the returns found in foreign markets without necessarily purchasing these individual securities. This provides you with a reduced risk exposure, while also opening up the opportunity to be in an international investment.

International Exchange Traded Funds

It should be noted that ETFs alone do not purchase the individual securities that underlie the fund. Nor does an investor have access to those securities. What an international ETF does is base its performance results on that of the index that it is based on.

That index can be invested in commodities such as oil, gold or silver or in stocks and bonds. The performance is tracked by the ETF and it is the basis of the return provided to the investor. An ETF is passively managed so that the investor has little direct exposure to the securities themselves. This does not mean that an ETF is not without risk, however. An investor in an international ETF can still lose some or all of the money invested in the fund.

Investing Requires a Smaller Capital Outlay

An international ETF requires a smaller amount of investment capital to get into, which increases investment opportunities for smaller investors who lack the same level of money as larger investors. This is an important factor to consider when purchasing an international ETF for an investor who is looking to increase their investment portfolio’s exposure to international securities without having to go out and buy shares of the individual international issues.

Lowering the capital requirement for a smaller investor allows them to achieve a greater diversification in their investment portfolios and avoid concentration risks that are all too common in a lot of smaller investor portfolios. Concentration risk comes about when an investor purchases securities on the same side of the market that are of the same asset class such as all stocks or all bonds. A diversified portfolio should consist of some U.S. domestic equity securities, some U.S. domestic fixed income securities, money market funds, commodities and international securities.

Reducing Research and Necessary Investment Due Diligence

The other factor that benefits an investor considering international ETFs is that the research needed to determine which international stocks and bonds should be included in the portfolio is already taken care of by the ETF. Instead of having to spend time performing exhaustive research on a countless number of companies and issuers to determine which securities to buy, an investor simply matches the investment strategy and objectives of the ETF to their own. This cuts down the work and makes including some international exposure to the security simpler.

Most all exchange traded funds are traded on the NASDAQ trading system and information about an appropriate international ETF for your investment portfolio can be found there.

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