Diversification is key to low-risk investing, and that applies to geographic diversification as well. This moneyland.ch guide lists different countries and regions that you can invest in using ETFs.
Investing in the stock markets of specific continents or countries is relatively simple if you use exchange-traded funds (ETFs). This moneyland.ch guide gives you a concise overview of ways to invest in different geographic regions.
Switzerland
Switzerland may be a small country, but it is an economic heavyweight. Although it has just nine million residents, it is one of the world’s 20 largest economies. Numerous globally-significant companies are headquartered in Switzerland.
The best-known Swiss stock indexes are the SMI and the SPI – with the SPI being more broadly diversified than the SMI, which only tracks 20 major stocks. There are also other Swiss stock indexes. You can find an overview in the moneyland.ch guide to Swiss stock indexes.
Investing in the country you live in has a number of advantages. These include familiarity with the companies in question, and the absence of currency exchange costs and currency exchange risk. Still, it is advisable to diversify your investments across different countries and regions, because a strong home bias creates a concentration risk.
Europe
Europe is often referred to as the old continent. But it remains a dynamic business landscape, with numerous world famous and profitable companies. Many experts consider European stocks to be somewhat undervalued, with potential for high growth. The best-known indexes for investing in the pan-European stock market include the Euro Stoxx 50 and the Stoxx Europe 600 – the latter of which also includes some Swiss stocks. You can find detailed information in the guide to investing in European stocks.
If you want to invest in specific European countries, there are ETFs that track national stock indexes that you can use for this purpose. For example, you can invest in the stocks tracked by the German DAX index, the French CAC 40, the Italian FTSE MIB, or the British FTSE 100 index.
North America
Stock investors hardly get around investing in US stocks because they account for a huge portion of the world’s total market capitalization. Many of the best-known and most innovative companies are headquartered in the US. Examples include big tech firms like Alphabet (Google), Apple, Microsoft, Nvidia, and Oracle.
The most important US stock market indexes are the S&P 500 and the Dow Jones Industrial Average. The Nasdaq 100, which primarily includes tech stocks, is also significant. You can find more information in the moneyland.ch guide to investing in US stocks.
Canada, the US’s northern neighbor, is also among the world’s leading economies. Its main stock index is the S&P/TSX 60. You can find an overview in the guide to investing in Canada.
Widely-diversified global stock indexes
Geographically diverse investing does not necessarily require national ETFs. Many global stock indexes offer a high level of geographic diversification. Major global stock indexes include the MSCI World and the FTSE All-World.
You should be aware, though, that most of these indexes have large US stock components. In many cases, US stocks can make up more than two-thirds of the index. Many countries, particularly developing countries, are hardly represented at all. You can find more information in the guide to investing in the global stock market. If you specifically want to exclude the US stock market, refer to the guide to investing without US stocks.
Latin America
Latin America encompasses many developing economies that are not well represented in most global indexes. Even major indexes that specifically track the Latin American stock market, such as the S&P Latin America 40, only include a handful of countries. Brazil generally makes up more than 50 percent, and the Mexican stock market typically makes up a substantial component as well. You can get a good overview in the guide to investing in Latin America.
Asia
Asia is the world’s largest continent by land mass, and is home to many dynamic economies including China, Singapore, Thailand, and Vietnam, among others. There are numerous stock indexes that can be used to invest in the Asia-Pacific region, but Australia and New Zealand make up a large part of many of these. You can learn more in the guide to investing in Asian stocks.
Japan, which has long been a highly developed industrial country, is excluded from many Asian stock indexes. But there are ETFs that track national Japanese stock indexes like the Nikkei 225.
How to find the right ETF
Not all ETFs are identical. There are major differences between individual products. Because there are often multiple ETFs that track the same index, it can be difficult to know which one to use. The checklist for choosing an ETF tells you what to look at.
Africa
No continent is as under-represented in global stock indexes as Africa is. Targeted investments African stock markets can help to iron out the geographic inequalities in your portfolio. It is also worth considering that Africa is an economically and demographically dynamic region with potential for economic growth.
In addition to ETFs that replicate pan-African stock indexes – like the SGI Pan Africa Index – there are also ETFs that track national indexes. For example, there are various stock indexes that track the stock markets of South Africa and Egypt. It is worth noting, though, that not all Swiss stockbrokers offer the same selection of Africa ETFs. You can find more information in the moneyland.ch guide to investing in Africa.
Australia
For some people, Australia is a dream travel destination. For others, the continent-country is an investment opportunity. Australia is among the world’s wealthiest countries. Because it largely owes its wealth to an abundance of natural resources, it is not surprising that its main stock indexes are dominated by the financial and commodity sectors. If you want to add Australian stocks to your investment portfolio, you can get useful information in the guide to investing in Australia.
Disclaimer: This article is provided for educational purposes only, and should not be seen as investment advice. The publisher does not accept any liability in connection with this publication.
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