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)
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.