There are different types of ETFs. Some of these are commodity, sector, industry, and global, just to name a few. Here we will discuss the last of the named types.
A global ETF, as the name implies, puts investments in different financial markets in the world. Contrast it with a commodities ETF which focuses investing in a certain commodity like oil, or with a sector ETF with a focus on just one sector like technology, or with an industry ETF with a focus on an industry like transportation.
There are advantages to investing in ETFs which make them appealing to both old and new investors. Global ETFs behave differently than local stock market conditions. So even if there is a decline in the local market, one may still gain in one’s investment abroad. Investing in Global ETFs, one can decide which country or countries to put money in. Also, one can choose the industry to put the investment in. Since the investment is diverse and in different regions, one’s portfolio is naturally improved and the risk of loss is lowered. Investing in Global ETFs also give traders the information on how local markets perform, thus getting a chance to determine the economic strength of a certain country. Hence, they may intend to open up more investments in that country and benefit from it.
There are also some disadvantages to investing in Global ETFs. If the country or countries where one’s investment lies depend to some degree to the prevailing market situations where one’s other investment are, then a negative situation in one may affect the other. Since Global ETFs diversify one’s investments, profits are lessened because one’s investments are scattered, as compared to putting a substantial amount of investment in just one industry. Also, economic and even political conditions beyond prediction or control can affect gains if these situations negatively affect market conditions.
ETFs are following some indices. Those indices might be of bonds or stocks. If ETFs are investing in bonds then you usually may see a possible yield (yield to maturity) that you may earn from investment in such ETFs.
When ETFs are investing in stocks, then you can now the main information about that market. For example, if fund is investing in dividend stocks, then you should pay attention to such ratios as yield of dividend, dividend ratio and similar characteristics of high dividend paying stocks.
If index represents market of growth stocks, then you necessary have to look at price-to-earnings multiple and PEG ratio for stocks if possible. Such ratios are main for stock market and normally benchmark indices should give you that information. If those ratios are not provided, you can calculate them by yourself, but it may take a lot of time and going to be much more difficult.
Nevertheless, investing in Global ETFs is a safe practice since placing investments in different sectors and regions protect one from losses if a certain sector or region experiences some set back. Its gains outweigh its risks and investing in them is a favored investment form nowadays.
Global ETF provides for you good diversification, which can be the most important factor for modeling of good investment portfolio. ETFs allow you to invest in different asset classes as stocks, bonds, money market, real estate and other. You should take those benefits and use them as long as it give you an advantage.
Fees also are very important factor when investing in traded funds globally. Global investment is much easier with help of ETF and allows you to save a lot of money that you would spend for management, sales-load, administration, redemption and other fees that comes with regular mutual funds. But name of ETF does not guarantee for you low fees. Yes, it normal that ETF has much lower fees than investment funds, but not all ETFs have that low management fees. Some exotic funds make take higher fees than normal ETF. To avoid that you simply should check on the Total Expense Ratio of the fund. If this one is ok, then you don’t have to worry about fees very much. But still should check trading and depository fees, because most probably you must pay those too.
