Many investors who include foreign stocks in their portfolios do so through diversified funds to avoid placing too big a bet on just a few countries. But some more daring investors focus on stocks of just a few countries whose prospects appear especially attractive. Many of the 151 exchange-traded funds (ETFs) that focus on just one country may be more risky and volatile than diversified foreign funds, so it’s important to pinpoint countries that are experiencing strong economic growth and/or undergoing government reforms likely to stimulate their economies. In the last issue of Bottom Line Personal, ETF expert Neena Mishra pinpointed “unique” ETFs such as one focused on cybersecurity stocks…and in this issue, she describes her two favorite single-country ETFs…
WisdomTree India Earnings (EPI). Instead of tracking a traditional index in which the largest companies get the heaviest weightings, this ETF weights its 300 stocks on how profitable they are. Highly profitable companies are seeing the greatest benefits from recent economic reforms in the world’s most populous democracy. The fund was up 36% in 2017.* Five-year performance: 10%. WisdomTree.com
Deutsche Xtrackers MSCI Japan Hedged Equity (DBJP). The Japanese economy is expected to grow nearly 2.5% in 2018—a level it hasn’t reached since 2010—thanks in part to recently re-elected Prime Minister Shinzo Abe’s aggressive economic stimulus efforts. This ETF tracks an index of large- and mid-cap Japanese stocks, and it hedges currency fluctuations against the US dollar, in effect neutralizing the risk that a weakening yen could hurt performance. That’s important because Abe’s economic reforms are likely to weaken the yen. The fund returned 19.3% in 2017. Five-year performance: 17.9%. ETFUS.DeutscheAM.com
*2017 performance figures and five-year annualized returns are through November 24.