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International ETF Portfolio For March (EWT, EWY, RSX, EWC, EUM, UUP, UDN)

March 7th, 2011

Each month I update a momentum based ranking system of individual country ETFs.  Historical studies have shown that momentum based strategies have performed well over time; thus, each month I put a variety of these strategies to the test on Scott’s Investments. Below is a table ranking a diverse list of individual country ETFs  based on the average of their 3, 6, and 12 month returns.  This list is tracked monthly on the right hand side of my blog Scott’s Investments.  

I have added an exciting new feature to the most popular ETFs tracked on the site.  This strategy is now tracked real-time as a hypothetical portfolio with a starting balance of $10,000 at the start of 2011.  The advantage is to provide a more realistic portfolio experience.  To view the returns and portfolio, simply click on “2011 International ETF” portfolio on the right hand side of Scott’s Investments. The new tracking system also provides a easy tracking of transactions. For March, we are performing the following trades:
 

Sell 142 shares of  the iShares MSCI Taiwan Index (NYSE:EWT)
Sell 36 shares of the iShares MSCI South Korea Index  (NYSE:EWY)
Buy 51 shares of the Market Vectors Russia  (NYSE:RSX)
Buy 63 share of the iShares MSCI Canada Index  (NYSE:EWC)
 
The pool of ETFs analyzed for this strategy has also been greatly expanded – we are now tracking an international basket of 15 fixed income and currency ETFs and 45 equity related ETFs. 

There are several approaches one can take to momentum investing, such as those detailed here and here.  However, for the purpose of this strategy we are hypothetically purchasing the top 4 ETFs as ranked by the average of 3, 6, and 12 month returns and which are also above their 200 day simple moving average. When the ETF is no longer in the top 5 at month end, it is sold and replaced with the next highest ETF.

The International ETF portfolio I began at the beginning of 2011 was unfortunately launched at the time money (and momentum) began shifting from emerging markets, which generally had a stellar run in 2010.  Thus, returns for the first 2 months of the year have been extremely disappointing.  However, I will continue to track the strategy.  
 
If you are worried about market drawdowns, two options to improve this strategy would be to use ETF Replay to screen for international ETFs that also have low volatility coupled with high momentum. Also, long positions in often volatile emerging markets could be coupled with a higher cash position or a position in an inverse, international focused ETF such as ProShares Short MSCI Emerging Markets (NYSE:EUM).
 
An additional concern when investing in international ETFs is the role of currency conversion in affecting returns.  Movements in the US Dollar can impact the returns of these ETFs since funds need to be exchanged when purchasing securities abroad.  There are some “dollar neutral” mutual funds and ETFs that attempt to invest internationally and hedge currency risk.  However, with currency hedging an investor may also miss some of the benefit, or gains, of currency exposure. Nevertheless, investors should be aware of the impact (both positive and negative) exchange rates have on returns and that the option for hedging currency exposure exists. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) and PowerShares DB USD Bear ETF (NYSE:UDN) are two options for hedging positive or negative moves in the US Dollar. 

Many of the strategies detailed here were inspired by Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets

The data source for the information below is Finviz.

Ticker Company Int’l Portfolios 200-Day SMA
(EPU) iShares MSCI All Peru Capped Index Here 14.25%
(RSX) Market Vectors Russia ETF Here 21.68%
(EWD) iShares MSCI Sweden Index Here 15.03%
(EWC) iShares MSCI Canada Index Here 19.12%
(EWG) iShares MSCI Germany Index Here 17.08%
(EWO) iShares MSCI Austria Investable Mkt Idx Here 16.82%
(SCZ) iShares MSCI EAFE Small Cap Index Here 15.46%
(IDV) iShares Dow Jones Intl Select Div Idx Here 15.43%
(THD) iShares MSCI Thailand Invest Mkt Index Here 9.00%
(DLS) WisdomTree International SmallCap Div Here 14.09%
(SCJ) iShares MSCI Japan Small Cap Index Here 15.32%
(EWA) iShares MSCI Australia Index Here 15.09%
(EWY) iShares MSCI South Korea Index Here 9.25%
(EWQ) iShares MSCI France Index Here 15.18%
(EWU) iShares MSCI United Kingdom Index Here 14.06%
(EWW) iShares MSCI Mexico Investable Mkt Idx Here 11.27%
(EZA) iShares MSCI South Africa Index Here 9.84%
(EWN) iShares MSCI Netherlands Invstbl Mkt Idx Here 13.31%
(EWT) iShares MSCI Taiwan Index Here 11.07%
(EWJ) iShares MSCI Japan Index Here 14.13%
(EWI) iShares MSCI Italy Index Here 13.84%
(IGF) iShares S&P Global Infrastructure Index Here 13.25%
(EWL) iShares MSCI Switzerland Index Here 13.02%
(EWM) iShares MSCI Malaysia Index Here 7.75%
(EWP) iShares MSCI Spain Index Here 11.92%
(EWH) iShares MSCI Hong Kong Index Here 7.40%
(DEM) WisdomTree Emerging Markets Equity Inc Here 8.63%
(FXA) CurrencyShares Australian Dollar Trust Here 9.54%
(GAF) SPDR S&P Emerging Middle East & Africa Here 6.61%
(FXF) CurrencyShares Swiss Franc Trust Here 8.71%
(DGS) WisdomTree Emerging Mkts SmallCap Div Here 4.61%
(EWK) iShares MSCI Belgium Investable Mkt Idx Here 8.88%
(GXG) Global X/InterBolsa FTSE Colombia 20 ETF Here 2.38%
(EWS) iShares MSCI Singapore Index Here 3.46%
(IDX) Market Vectors Indonesia Index ETF Here 2.92%
(WIP) SPDR DB Intl Govt Infl-Protected Bond Here 7.54%
(EWZ) iShares MSCI Brazil Index Here 5.56%
(BRF) Market Vectors Brazil Small-Cap ETF Here 4.05%
(EIS) iShares MSCI Israel Cap Invest Mkt Index Here 6.18%
(FXC) CurrencyShares Canadian Dollar Trust Here 5.23%
(ECH) iShares MSCI Chile Investable Mkt Idx Here 1.35%
(FXB) CurrencyShares British Pound Sterling Tr Here 4.49%
(ISHG) iShares S&P/Citi 1-3 Yr Intl Treasury Bd Here 4.91%
(GXC) SPDR S&P China Here 2.00%
(FXY) CurrencyShares Japanese Yen Trust Here 3.57%
(FXE) CurrencyShares Euro Trust Here 4.97%
(BWX) SPDR Barclays Capital Intl Treasury Bond Here 3.85%
(DBV) PowerShares DB G10 Currency Harvest Here 3.04%
(FXI) iShares FTSE China 25 Index Fund Here 0.94%
(IGOV) iShares S&P/Citi Intl Treasury Bond Here 3.24%
(PICB) PowerShares International Corporate Bond Here 3.33%
(ENZL) iShares MSCI New Zealand Invstb Mkt Idx Here 1.13%
(EMLC) Market Vectors EM Local Curr Bond ETF Here 0.70%
(HAO) Guggenheim China Small Cap Here -0.58%
(ELD) WisdomTree Emerging Markets Local Debt Here 0.05%
(EMB) iShares JPMorgan USD Emerg Markets Bond Here -0.17%
(VNM) Market Vectors Vietnam ETF Here -3.27%
(CEW) WisdomTree Dreyfus Emerging Currency Here 0.41%
(PIN) PowerShares India Here -5.49%
(TUR) iShares MSCI Turkey Invest Mkt Index Here -7.95%

Written By Scott’s Investments   No position disclosures   

Scott’s Investments focuses on several different ETF portfolio strategies ranging from Basic, Individual, Country, US Sector, and Global Sector ETF portfolios.


NYSE:EUM, NYSE:EWC, NYSE:EWT, NYSE:EWY, NYSE:RSX, NYSE:UDN, NYSE:UUP


 

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