If you're anything like me, you have trouble deciding sometimes. Should you invest in this company or that one? This region or that one? Too many times, I'll end up grabbing a little of this and a little of that. While that solves that problem, it does result in having more than an ideal number of holdings.
One way around such overdiversification is to invest in some indices. Broad-market indices, such as the S&P 500 for U.S. stocks or the MSCI EAFE Index for international stocks, give you immediate diversification into hundreds of different companies. Getting into those indices is as easy as buying shares of SPDR Trust
You can be a little more focused, though, if you want. For example, if you're drooling over massive opportunities in India and China, you might look into the First Advisors LSE ChIndia Fund
Gary Gordon of etfexpert.com offered this caution for the fund:
However, there are significant dangers with the FNI basket, including: (1) a 37% exposure to information technology and a 14% exposure to telecom that may put one directly in the line of fire for a "tele-tech" implosion, (2) a price/book of 7 and price/earnings of 45 looks lofty in the best of circumstances, and (3) indirectly investing in the China/India boom via the tigers (Malaysia, Singapore, Taiwan, Korea) and the iShares MSCI Australia Fund
(NYSE:EWA)could prove more lucrative with less risk.
Another option for the undecided or those seeking simplified international exposure are "BRIC" funds, offering Brazil, Russia, China, and India. The Claymore BNY/BRIC Fund
What to do
In general, it's a very good idea to keep a portion of your portfolio invested internationally. Mutual funds and ETFs offer a simple way to do so.
I encourage you to learn much more about ETFs in our ETF Center. It features info on how ETFs stack up against mutual funds, how to develop an investment strategy with ETFs, pitfalls to avoid, and how to avoid ETF imposters.
These articles may also be of interest:
- The Key to ETF Success
- Best and Worst ETFs
- A Japan ETF With a Fundamental Twist
- An ETF That Gets Around
And finally, if you're interested in investing in individual international stocks, let us point you to some of the most promising and exciting foreign companies we've found. You can test-drive (for free) our new Global Gains newsletter for some recommended foreign investments. A free trial will give you full access to all past issues, so you can read in detail about every recommendation.