No asset allocation strategy worth the name can ignore foreign equities. More than half of the world’s equity capitalization lies beyond America’s shores. The challenge is figuring out where to begin when moving offshore. There are nearly 900 mutual funds (not counting different share classes) and close to 80 ETFs that fall under the heading of “international” stock portfolios, according to Morningstar. And the list keeps growing.
Two new ETFs (one from State Street, one from Vanguard) help simplify the decision by offering all the world’s non-U.S. equities in one package. The SPDR MSCI ACWI ex-US (CWI) and VANGUARD FTSE ALL-WORLD EX-US (VEU) combine developed markets with emerging markets. (The Vanguard ETF is also available as a mutual fund via the ticker VFWIX). This is old hat in mutual funds, but it’s something new for ETFs.
Conceptually, the idea of buying all non-U.S. equities in one fund as opposed to breaking up the allocation into developed and emerging market portfolios appeals to investors looking for a core product for foreign stocks that’s comparable to the broad-minded Russell 3000 or S&P 1500 for U.S. equity market exposure.
Your editor interviewed spokesmen for State Street and Vanguard on the new international ETFs in the March issue of Wealth Manager. To learn more about these products, read on….