One of the big advantages of investing in exchange traded funds (ETF) is that these instruments represent a cost-effective and sometimes conservative approach to gaining exposure to international markets. And with so many international markets, both developed and emerging, enjoying banner years in 2009, U.S. investors should bone up on a few offerings from the world of global ETFs.

IN PICTURES: How To Make Your First $1 Million

Get out your ETF passport and let's have a look at three international ETFs that may offer investors returns that are worth traveling for.

iShares MSCI Australia Index (NYSE:EWA) Assets: $2.45 billion Expense Ratio: 0.52%
iShares MSCI Mexico Investable Market Index (NYSE:EWW) Assets: $943 million Expense Ratio: 0.52%
iShares MSCI Pacific Ex-Japan (NYSE:EPP) Assets: $4.14 billion Expense Ratio: 0.50%

No Recession Here
Australia is one of the few developed countries that is expected to grow faster than other countries with positive GDP growth of 0.8% forecast for 2009, and expected to rise to 2.4% in 2010 and 3.5% in 2011. And after paring interest rates to their lowest levels in 50 years from September, 2008 to April, 2009, the Reserve Bank of Australia boosted rates in October and earlier this month. Another rate hike is expected in December.

The Aussie dollar is one of the strongest currencies in the world, and that strength should continue as gold prices move higher. Australia is one of the biggest gold exporters in the world, so it's not surprising to see the iShares MSCI Australia Index hold big stakes in mining firms like BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP).

Most of EWA's assets are allocated in the financial sector at 45.30% and 24.70% in the materials sector (as of December 30, 2009).

Staying Close to Home
Mexico shares a border with the U.S. and is one of our biggest trading partners, but for some reason the iShares MSCI Mexico Investable Market Index doesn't get a lot of press in comparison to other Latin America ETFs. Despite the fact that Fitch cut its credit ratings on Mexico to BBB, some fund managers expect the peso to rise by up to 20% against the U.S. dollar over the next year.

Mexico's economy is in a recession fueled by widening deficits and declining oil production, but EWW has still managed to gain 50% year-to-date. On the surface, it may appear that this rally is nothing more than a case of Mexico following other markets higher, but if oil prices surge or deficits decline, EWW may have more positive returns in store for investors.

There are a lot of moving parts with that thesis, so it might be best to keep an eye on the peso in the near-term before jumping right into a position in EWW.

Asia sans Japan
Not to kick Japan while it is down, but it doesn't take much to find a better country to invest in the Pacific Rim. The iShares MSCI Pacific Ex-Japan tracks stocks in Australia, Hong Kong, New Zealand and Singapore. We previously mentioned the iShares MSCI Singapore Index (NYSE: EWS) as the ETF way to play Singapore and EWS and EPP are both up about 60% year-to-date.

EPP is Australia-heavy and holds a lot of the same stocks as does EWA, but if you want exposure to Australia without focusing your attention exclusively down under, EPP may be worth considering. One caveat: sector diversification leaves something to be desired as materials and financials comprise more than 60% of EPP's holdings.

The Bottom Line: Hard to Bet Against Australia
Australia remains one of the most compelling international markets to invest in and if commodities continue to fan the flames of a global equity market rally, you can be sure Australia is going to benefit. That's makes EWA and EPP the safer plays here, but that doesn't mean your speculative side should ignore Mexico. If any of trouble spots we mentioned earlier become positive catalysts, EWW could keep moving higher. (For more on ETFs, check out ETFs Vs. Index Funds: Quantifying The Differences.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI Emerging Mkts

    Learn more about the PowerShares FTSE RAFI Emerging Markets ETF, a fundamentally weighted fund that tracks emerging market equities.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares Cali AMT-Free Muni Bond

    Learn more about the iShares California AMT-Free Municipal Bond exchange-traded fund, a popular tax-advantaged ETF that dominates its category.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Dividend

    Learn more about the SDPR S&P Emerging Markets Dividend Fund, a yield-focused exchange-traded fund tracking global emerging economies.
  4. Mutual Funds & ETFs

    ETF Analysis: First Trust Dow Jones Global Sel Div

    Find out about the First Trust Dow Jones Global Select Dividend Index Fund, and learn detailed information about characteristics and suitability of the fund.
  5. Mutual Funds & ETFs

    ETF Analysis: U.S 12 Month Natural Gas

    Learn about the United States 12 Month Natural Gas Fund, an exchange-traded fund that invests in 12-month futures contracts for natural gas.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares Floating Rate Bond

    Explore detailed analysis and information of the iShares Floating Rate Bond ETF, and learn how to use this ETF as a defense against rising interest rates.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Short S&P500

    Find out information about the ProShares UltraPro Short S&P 500 exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  8. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Investment Grd Fl Rt

    Learn more about the SPDR Barclays Investment Grade Floating Rate Fund, which tracks an index of highly rated floating debt securities.
  9. Mutual Funds & ETFs

    ETF Analysis: ALPS Medical Breakthroughs

    Learn more about a unique and innovative exchange-traded fund (ETF) in the biotechnology industry: the ALPS Medical Breakthroughs Fund.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Healthcare

    Learn about the iShares U.S. Healthcare exchange-traded fund, which invests in a wide range of health care providers, hospitals and home care facilities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. The New Deal

    A series of domestic programs designed to help the United States ...
  4. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!