Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Think Small Cap Stocks When Investing International

Stock-Markets / Investing 2010 Sep 02, 2010 - 09:01 AM GMT

By: Ron_Rowland

Stock-Markets

Best Financial Markets Analysis ArticleYou won’t be surprised when I say the U.S. markets are lousy right now. Can you find niches that are performing well? Sure — I often highlight these for you when I see them. But most U.S. stocks and sectors are going sideways at best. Moreover, I don’t see the situation changing in the near future.


This doesn’t mean you’re stuck in a low-yielding cash account, though. The world is full of opportunity for those who know where to look. Places like South America and Southeast Asia are still growing nicely, despite weakness in the U.S. and Europe.

Today I’ll show you how to follow this theme with an emerging new category of exchange traded funds (ETFs): International small-caps.

Small-Caps: The Key to Growth

U.S. investors are familiar with the superior growth potential of small-cap stocks. It just makes sense … the big blue chips are hostage to their own size and scale.

A small technology outfit, for example, can potentially double its earnings easier and faster than General Electric (GE) can.

The other side of this coin, of course, is that the small technology outfit is also more likely to go completely out of business. GE is probably not going anywhere — though after what we’ve seen over the last few years we can’t rule out any possibility.

Blue chips, like GE, have a good chance of surviving the recession.
Blue chips, like GE, have a good chance of surviving the recession.

This company-specific risk is why small-cap stocks are more volatile. It’s also a good reason to diversify your holdings across a large number of individual stocks. Small-cap ETFs and mutual funds are an easy way to do this.

Small-Cap Advantage: Domestic Focus

Small-caps have another characteristic that is important in an international context. They tend to be less dependent on exports and more exposed to the local economy.

Again, this makes sense if you think about it …

Giant multinational corporations, by definition, do business all over the world. This makes them less cyclical. But it also means they won’t benefit as much from booming conditions in any one place.

Some small companies are very involved in exports, too. But for the most part they tend to do their business locally — or at least in the same country. This means they provide more concentrated exposure to their nation’s economy.

Now, let’s put two and two together:

If international markets are growing faster than the U.S. …

And if small-caps have the most growth potential

And those same small-caps give you the most direct exposure to foreign economies …

 … then doesn’t it make sense to direct your dollars into international small-caps?

Small-caps have the most profit potential.
Small-caps have the most profit potential.

Of course! This is just as true now as it ever was. The difference is that with ETFs you now have many more ways to invest in this category.

In fact, I count around two dozen international small-cap ETFs now available. They cover a wide variety of markets: Developed, emerging, Europe, Japan, China and many others.

More such ETFs are coming out all the time. I don’t have room to give you the complete list and it would likely be outdated soon anyway. However, here are a few ideas for you to review:

Vanguard FTSE All-World Ex-U.S. Small-Cap (VSS) has the broadest available international small-cap exposure and covers both developed and emerging markets. Like most Vanguard products, it also has a reasonable cost structure.

Schwab International Small-Cap Equity (SCHC) and iShares MSCI EAFE Small-Cap (SCZ) are both similar, but they focus on just the developed markets.

Asia has some of the hottest small-cap stock markets.
Asia has some of the hottest small-cap stock markets.

Incidentally, both Vanguard and Schwab offer free (or very inexpensive) trading commissions for their in-house ETFs via their brokerage affiliates. Fidelity does the same thing with many of the iShares ETFs including SCZ. There are some restrictions, but penny-pinching investors should take note.

WisdomTree Emerging Markets Small-Cap Dividend (DGS) and SPDR S&P Emerging Markets Small-Cap (EWX) exclude the developed markets like Canada, Japan, and the U.K. and cover the emerging markets small-cap group. This is good because most of the developed market countries are not doing much better than the U.S.

If you’re looking to zero in on small-caps in the hottest Asian markets, you have several good choices. Take a look at …

  • Claymore/AlphaShares China Small-Cap (HAO)
  • IQ South Korea Small-Cap ETF (SKOR)
  • IQ Taiwan Small-Cap ETF (TWON)
  • Market Vectors India Small-Cap (SCIF)
  • EGS INDXX India Small-Cap (SCIN)

Finally, let’s not forget about our neighbors to the South. I’ve written before about Market Vectors Brazil Small-Cap (BRF). A somewhat broader choice is Market Vectors Latin America Small-Cap (LATM).

Some of the ETFs I just listed are new and don’t have much operating history. As always, do your own research to see if they’re a good fit for you before you buy.

New international small-cap ETFs are coming out quickly, so there will probably be even more choices soon. Watch them closely. I bet you will find something to like.

Best wishes,

Ron

P.S. I offer specific global ETF buy and sell ideas, including international small-caps, in my International ETF Trader service. Right now you can subscribe to this service at an unprecedented low rate. Click here for details.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Tom
05 Sep 10, 20:55
All cap all market ex-US index?

If I wanted to compare the market cap segmentation of my international exposure to an all cap (not limited to large, mid, small, etc., but including all caps), all markets (developed & emerging), value weighted, is there any such broad international index? Or say any two indices which in properly weighted combination would represent the ex-US world, in toto?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules