To have good investment growth with the potential for reduced volatility and risk you should strongly consider investing globally. By incorporating international stocks into your portfolio you are tapping into a market that contains many great companies. You also get exposure to currency changes which has the potential to protect you from future inflation.
One minimalist approach to have a global equity portfolio is to simply use two exchange-traded funds: the Vanguard FTSE All-World ex-US (amex: VEU) and the iShares Dow Jones U.S. Total Market (amex: IYY). For an annual fee of only 0.25%, the Vanguard fund gives you exposure to 2,200 stocks of companies located in almost 50 countries and roughly half of the companies are mid- or small-caps. The iShares Dow Jones fund tracks an index of 1,632 stocks covering about 95% of U.S. markets for an annual fee of only 0.20%.
For a kicker you can add another layer, which allows you the opportunity to overweight some markets you feel are the most promising. Perhaps you think Asia, or energy show exceptional promise. If so, you can use sector and country exchange-traded funds to increase tactical exposure to these markets.
For more Asia-Pacific exposure, consider iShares Singapore (amex: EWS), iShares Malaysia (amex: EWM), iShares Australia (amex: EWA), iShares China (nyse: FXI) and iShares Hong Kong (amex: EWH). All of these funds track their respective indexes.
For energy, you could add the iShares S&P Global Energy (amex: IXC) or you might want to take advantage of the privatization program in Sweden by investing in iShares Sweden (amex: EWD). To maintain discipline, limit the number of positions and before you invest in a new market, force yourself to raise cash by selling a winner or harvesting a loss from elsewhere in your portfolio.
When considering a sector or country fund consider your risks and include these criteria in your evaluation: market momentum, measured by 50- and 200-day moving averages; relative valuations of world stock markets; macro factors such as politics and the pace and direction of economic growth and interest rates; and, finally, evaluate where large global equity fund managers are putting fresh money. Most importantly, think through the countries and global sectors that you believe will outperform and then add them to your portfolio.
Related Activities and Side Trips
- Create an Asset Mix Using Diversification and Your Target Portfolio
- Emerging Market Equities – BRICs and Other Considerations
- Emerging Markets in Your Portfolio
- Every Investor Should Have Investment Rules for Asset Allocation and Rebalancing
- Global Investing – Adding Foreign Stocks as U.S. Ends its Worst Decade Ever
- Index Funds, Tax-Managed Funds and ETFs – Low-Cost, Diversified
- International Investing
- Use an ETF to Build Net Worth
Itinerary for the Wealth & Prosperity in Prosperity Quadrant III Trek
Wealth & Prosperity in Prosperity Quadrant III- Trek III: Building Wealth and Finding Fulfillment
- Wealth and Prosperity: Save From Income: Get the 401(k) Match
- Trek III: Get Disability Insurance
- Trek III: Get Free Credit Report
- Trek III: Evaluate Your Debt
- Wealth and Prosperity: Debt: Improve Your Credit Score
- Trek III: Reduce Credit Card Debt
- Trek III: Automate Your Banking
- Wealth and Prosperity: Save From Income: Fund a Roth IRA
- Trek III: Wealth and Prosperity: Debt: Debt Payoff Plan
- Trek III: Lower Your Credit Card Interest
- Trek III: Set Financial Goals
- Trek III: Reach Financial Goals
- Trek III: Your Investing Environment
- Trek III: Investing Fundamentals
- Trek III: Fixed Income Investing
- Trek III: Equity Investing
- Trek III: Money Market Investing
- Trek III: Evaluate Investment Advice
- Trek III: Invest Globally
- Trek III: Know Your Risk Tolerance
- Trek III: Risk and Your Portfolio
- Trek III: Know Your Time Horizon
- Trek III: Goal-Based Investing
- Trek III: Your Asset Allocation
- Trek III: Wealth and Prosperity: Asset Accumulation: Long-Term Portfolio Recommendation
- Trek III: Portfolio Rebalancing
- Trek III: Invest in Taxable Accounts
- Trek III: Invest in 401(k) Non-Match
- Wealth and Prosperity: Protect: Emergency Fund
- Trek III: College Savings
- Wealth and Prosperity: Protect: Plan Your Estate
- Wealth and Prosperity: Protect: Long-Term Care Insurance
- Trek III: Invest in Traditional IRA
- Trek III: Health Savings Account
- Trek III: Evaluate Career Trends
- Trek III: Improve Your Career
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Define Your Income Plan
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Social Security
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Pension and Other Income
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Funding from Personal Savings
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Delay Retirement?
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Income Stream
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Income Stream: Annuity
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Income Stream: Asset Allocation
- Trek III: Wealth and Prosperity: Enjoyment: Retirement: Income Stream: Withdrawal Plan
- Trek III: Wealth and Prosperity: Enjoyment: Cash for Financial Goals
