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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some Pacific-region stocks to your portfolio, the Vanguard MSCI Pacific ETF (NYSEMKT: VPL ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.14%. It yields more than 3%.
This ETF has performed reasonably, beating the MSCI EAFE index of stocks outside the U.S. and Canada over the past five years but not over the past three. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 4%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
Why the Pacific?
It's valuable to diversify your portfolio geographically, lest the one or two regions you've invested in fall on hard times. The Pacific, including developed economies such as Japan and Australia, deserves consideration.
More than a handful of Pacific-based companies had strong performances over the past year. Australia-based Westpac Banking (NYSE: WBK ) , for example, surged 49% -- and still yields a fat 5.6%. It's somewhat threatened, though, by an economic slowdown in China, which uses many commodities produced by Australia, and some worry about a housing slowdown as well.
Japan's Mitsubishi UFJ Financial Group (NYSE: MTU ) gained 8% and yields about 2.6%. The company recently reported disappointing earnings, with EPS down 36% over year-ago levels. Rising credit costs were a problem, but bulls are hopeful about the company's global strategic alliance with Morgan Stanley.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. U.K.-based mining company Rio Tinto (NYSE: RIO ) , which has substantial operations in Australia, dropped 5% and yields about 2.7%. The major iron ore producer is poised to profit from a global economic recovery, as manufacturing and infrastructure work pick up and demand for steel rises. The company recently posted a record $3 billion loss, though, and hiked its dividend by 18%. Analysts at Zacks have upgraded Rio Tinto from underperform to neutral, based on smart acquisitions and cutting costs.
Japan-based Canon (NYSE: CAJ ) shed 21% and yields about 4.2%. The company has posted some disappointing numbers in recent quarters. Boding well, though, is its patent strength. Canon USA has been one of America's top five patent holders for 27 consecutive years. Canon recently released a new Mixed Reality 3-D headset, and has been taking market share from printer rivals such as Lexmark.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
You can actually diversify your portfolio geographically while buying stock in American companies. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.