11 Favorite Funds and ETFs for Global Diversification

With management expertise and portfolio diversification, mutual funds and ETFs are particularly well suited for those seeking to add global exposure to their portfolio. Several leading investment experts, and contributors to MoneyShow.com, highlight some top fund ideas for global growth investors. Robert Powell, Retirement Daily I often reviews newly launched exchange-traded funds that might be of interest to those saving for or living in retirement, such as these newly launched ETFs focused on Japanese equities. BlackRock's iShares recently expanded its offering of exchange-traded funds dedicated to Japanese equities. IShares launched the first Japanese equity-focused ETF in 1996 with iShares MSCI Japan ETF , still the largest such ETF with over $14 billion in assets. And now, iShares has introduced two product extensions to EWJ -- iShares MSCI Japan Equal Weighted ETF and iShares MSCI Japan Value ETF . According to Lou Conrad, of COMPASS Wealth Management, LLC, in Concord, Mass., the equal-weighted ETF begins with the same index as EWJ, but instead of weighting each index component by its market capitalization, each component is given an equal weighting at quarterly rebalancings. The result, Conrad says, is that mid-cap Japanese equities comprise a larger percentage of EWJE than of EWJ. Another difference between the two is the newcomer is priced with an annual expense ratio of only 0.15% versus the 0.47% of the much larger EWJ, he says. The equal-weighted version, says Conrad, may be appropriate for retirement investors who would prefer to skew their Japanese equity exposure toward mid-sized companies that may be more prone to grow faster, though they may also be more volatile than their large-cap brethren. The new value-oriented version, EWJV, begins with the same index as EWJ, but then applies three value screens to determine its components: book value to price, 12-month forward earnings to price, and dividend yield, says Conrad. The result is an ETF that is more heavily weighted toward the consumer discretionary, financial, and industrial sectors, he says. Consequently, this lack of sector diversification may increase the volatility that retirement investors thought they were tempering by excluding growth stocks. Like EWJE, this ETF has an annual expense ratio of 0.15%. Bob Carlson, Retirement Watch This is a good time to make your portfolio more diversified globally. I like a margin of safety. I see it in some international markets now where there are lower valuations and expectations are modest. There's far less of a margin and far more uncertainty in U.S. markets. WCM Focused International Growth is highly selective, owning only 32 stocks, and holds most of its positions for years. The 10 largest positions make up almost 40% of the fund. The fund seeks companies with high growth that it believes are sustainable. It wants companies with little or no debt and high returns on capital. Those companies should benefit from key global trends and benefit from one or more barriers to competition. Management at those companies should foster a growth culture. The system works well. The fund returned 5.13% in the last four weeks and 15.89% for the year to date. The largest sectors in the portfolio are technology, health care and consumer cyclical. I also recommend exposure to Asian emerging market stocks through T. Rowe Price New Asia . This is a long-time top-performing fund in the region that we've owned before. The fund doesn't try to follow an index. It focuses on the stocks and countries management likes. It recently owned 75 stocks and had 41% of the fund in the 10 largest positions. The fund follows T. Rowe Price's process of buying stocks of well-managed growth companies selling at reasonable prices. About 32% of the fund is in technology stocks and 22% in financial services. The fund returned 4.60% in the last four weeks and 17.50% so far in 2019. Brett Owens, Contrarian Outlook Utilities have a proven record of defying downturns; you just have to look at last year's autumn swoon to see this in action: utilities actually gained (including dividends) while pretty well every other market sector fell apart. I've also found a low-key way to buy utilities at a double-digit discount. It's a closed-end fund (CEF) called the Duff & Phelps Global Utility Income Fund , payer of an outsized dividend. The funds holdings include some of the steadiest names in the business, such Next Era Energy -- whose stock is 70% less volatile than the market, per its beta rating -- American Electric Power -- 83% less volatile -- Canadian electric utility Emera (Toronto: EMA) and Britain's National Grid (London: NG). That 11.4% markdown is the fund's discount to net asset value (NAV), which is CEF-speak for the fact that fund's market price is now 11.4% below the value of the stocks it owns. There's one more thing bulking up the fund's crash-resistance, and it comes back to the dividend: at the current dividend level, you're getting a huge part of your gain in cash, not just paper gains. If you own the fund for 11 years, the dividend will have paid you back 100% of your original investment. Carl Delfeld, Cabot Emerging Markets Investor If you take even a casual look at a list of the world's billionaires, one thing is absolutely clear: a great portion of their wealth was created not through investing in stocks, but real estate. ETFs are an easy way to put some global real estate in your portfolio with broad diversification, income, transparency and low costs. Here are three exchange-traded funds to consider. iShares Global REIT ETF is invested 65% in the United States, 7% in Japan, 6% in Australia, 5% in the United Kingdom, and the rest in countries such as France, Canada, Singapore, Hong Kong and South Africa. These are generally developed, strong economies with stable real estate markets. The ETF represents a low-cost, conservative way to get into the global real estate game. WisdomTree Global ex-US Real Estate ETF is a basket of international real estate companies weighted by dividends. It is up 17% so far this year with the top country weightings from Hong Kong, Singapore, Australia and Canada accounting for 63% of exposure. The ETF is a bit thinly traded but is a good play on international real estate markets. A more aggressive pick would be Invesco China Real Estate ETF , which is based on the AlphaShares China Real Estate Index tracking the performance of publicly traded companies and REITs in China, Hong Kong and Macao. The fund has an impressive dividend yield of 6.3% and shares are up 25.6% year to date. Jim Woods, The Deep Woods Our latest featured exchange-traded fund invests in tech companies based in or linked to Israel, a country that is an industry leader. The ARK Israeli Innovation ETF Hedged is a $20.67 million non-diversified fund that normally invests 80% of its total assets in securities that are included in its benchmark index, depositary receipts of securities included in the index or underlying stocks of depositary receipts included in the index. While the United States easily is the largest market for the tech industry, producing some of the most influential and biggest companies in the world, there are plenty of sizable opportunities abroad. For that reason, investors should not become dependent on simply buying shares in the popular FANG names that are based in the United States. Israel is one of the other places in the world that has become a hotbed of innovation. ARK is known for actively managing technology ETFs; it rolled out the fund focused on Israel in late-October 2015, noting that while it did not intend to do a country-specific fund, Israel and Israeli-based companies continuously were showing up in the firm's research. Israel is an innovation powerhouse.Pure tech stocks account for the majority of this fund's lineup, but it also invests in industries that will be affected by technology, including health care and telecommunications. The fund currently has $19.54 million in assets, its expense ratio is 0.49% and has a 12-month yield of 2.64%. Todd Rosenbluth, CFRA Research's The Outlook After a down year in 2018, emerging market mutual funds have bounced back handsomely to start 2019 amid optimism that risk taking will be rewarded with a more patient U.S. Federal Reserve and that trade tensions will ease. However, past performance is not necessarily indicative of future results -- a premise CFRA's mutual fund ratings approach was built on -- and we think investors looking to participate in potentially further gains need to go beyond a solely rearview mirror approach. Our five-star rated emerging markets funds tend to have strong performance records, low costs and appealing holdings. Year-to-date through April 18, the average emerging markets equity mutual fund rose 14.0%, nearly erasing the 16.4% decline achieved in 2018. However, some of CFRA's top-rated actively managed mutual funds in the Lipper peer group climbed even higher. Artisan Developing World Fund generated an impressive 24% total return to start the year, after losing just 15.7% in 2018. Though the fund only launched in mid-2015, it has already established a strong risk-adjusted track record. As of March 2019, the fund's three-year Sharpe ratio of 0.97 was well above the 0.64 peer average. The fund invests in companies that management thinks have the capital structure and business model to realize their domestic demand potential. From a holdings perspective, CFRA independently thinks the fund incurs only modest risk with many of its recent top-10 holdings earning above-average S&P Global Market Intelligence Quality Rankings. China (34% of assets), India (12%) and Brazil (10%) are the largest emerging market country exposures for this fund, which charges an in-line with mutual fund peers 1.4% expense ratio. Meanwhile, JPMorgan Emerging Markets Equity Fund rose 20.9% year-to-date through April 18. Similar to Artisan Developing World, JPMorgan Emerging Markets narrowly outperformed its peer average in 2018 with a 16.2% decline. This share class has a 17-year track record and in the last ten years has been in the top half of its peer group with regularity. Although its standard deviation is elevated, the fund's three-year Sharpe ratio of 0.90 was above the peer average. Further helping CFRA's five-star rating is a modestly lower 1.2% net expense ratio. Management aims to identify high-quality businesses that compound earnings sustainably over the long term and CFRA's research indicates this to be occurring. China (31% of assets), India (17%) and Hong Kong (7%) are the largest country exposures.

11 Favorite Funds and ETFs for Global Diversification

Mutual funds and ETFs are particularly well suited for those seeking to add global exposure to their portfolios.

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