International Stock Exposure for Long Term Investor

There are many people out there who want International Exposure for their long term or retirement portfolio, but who do not want to choose individual international stocks.

One good way to approach this is through investing in ETFs, Exchange Traded Funds, which are usually indexed mutual funds that you buy and sell just like individual stocks.

Two core international holdings for a long term portfolio are Barlays' Ishares.com EFA and Vanguard's VWO:

1. EFA: Ishares ETF Covers Developed International Markets including Western Europe, Japan and Australia.

2. VWO: Vanguard's ETF Covers Emerging International Markets including Brazil, China, Russia, India, South Korea, Taiwan and Mexico.

EFA: Developed International Market ETF

EFA has a low expense ratio of 0.35% (the lower the better. Many actively managed mutual funds have expense ratios over 1%).

The top ten countries that the fund invests in are (as of June 30, 2007):

1. United Kingdom: 22.93%
   
2. Japan: 21.05%
   
3. France: 9.74%
   
4. Germany: 8.25%
   
5. Switzerland: 6.61%
   
6. Australia: 6.22%
   
7. Netherlands: 4.10%
   
8. Spain: 4.10%
   
9. Italy: 3.81%
   
10. Sweden: 4.10%
    

Top Sectors include:

1. Financials: 28.48%
   
2. Industrials: 12.02%
   
3. Consumer Discretionary: 11.93%
   
4. Materials: 9.43%
   
5. Energy: 7.58%
   
6. Consumer Staples: 7.57%
   

VWO, Vanguard Emerging Markets ETF

VWO has an expense ratio of 0.30%.

Top Countries:

1. Korea: 16.2%
   
2. China: 12.6%
   
3. Taiwan: 11.9%
   
4. Brazil: 11.1%
   
5. Russia: 9%
   
6. South Africa: 7.3%
   
7. India: 6.5%
   
8. Mexico: 5.6%
   
9. Israel: 2.5%
   
10. Malaysia: 2.5%
    
11. Hong Kong: 2.3%
    
12. Poland: 1.7%
    
13. Turkey: 1.6%
    

Alternative to VWO: EEM: International Emerging Market ETF

EEM has an expense ratio (as of September 28, 2007) of 0.75%. This is higher than Vanguard's VWO ETF.

Some top countries that the fund invests in:

1. South Korea: 15.03%
   
2. China: 12.05%
   
3. Brazil: 11.29%
   
4. Taiwan: 10.50%
   
5. Russia: 9.16%
   
6. South Africa: 8.91%
   
7. Mexico: 7.04%
   
8. India: 5.98%
   
9. Israel: 3.31%
   
10. Indonesia: 2.28%
    
11. Chile: 2.07%
    
12. Thailand: 2.03%
    
13. Czech Republic: 1.95%
    
14. Hungary: 1.92%
    

Top Sectors include:

1. Financials: 20.50%
   
2. Information Technology: 15.46%
   
3. Energy: 15.39%
   
4. Materials: 14.58%
   
5. Telecom Services: 12.17%
   
6. Industrials: 5.88%
   

So in summary, for a long term investor who wants international market exposure without having to pick individual stocks, EFA, and VWO are two ETFs worth investing in as a core part of a long term portfolio.