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Picking the Best Single-Country ETFs

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To keep tabs on what’s happening in financial markets from around the world, all you have to do is watch exchange-traded funds that follow stocks from a particular country.

What’s hot? So far this year, equities from Brazil (EWZ) are ahead by a sizzling 22.4 percent, Canada (EWC) is up by 10.0 percent, and Taiwan (EWT) has jumped 9.4 percent.

What’s cold?

Stock markets of underperforming countries include China (GXC), off 12.6 percent; South Korea (EWY), down 11.1 percent; and Malaysia (EWM), which has declined by 9.2 percent.

What can help you to choose the best country ETFs? Here are a few things to keep in mind:

Country funds are often industry sector betsWith most single country ETFs, you aren’t just betting on a country’s equity market but also on a specific industry sector. For example, 57.80 percent of Brazil-EWZ’s sector representation is tied to basic materials and energy. This fund will be acutely affected by any rise or fall in commodity prices.

Country funds carry unique risksMany countries don’t have large, deep and diverse stock markets like that of the U.S. and other developed nations. It’s common for single-country ETFs to own just a handful of stocks and to be overweight in just the largest of companies. Another risk factor to consider is geo-political risks that can sometimes come into play. All of this may create unwanted volatility inside a portfolio.

Country funds are more expensive than broadly diversified international fundsAccording to, the average annual expense ratio for country ETFs is 0.58 percent compared to just 0.47 percent for broad equity international funds. Can the higher ownership costs of country ETFs be overcome with better performance? There’s no definitive answer.

There are currently 51 ETFs that track the stock markets of specific countries.

Where do country ETFs fit into investment planning?

After you’ve laid the foundation of a portfolio with a diversified mix of funds that cover the major asset classes, single country ETFs can be used as a handy tool.

For example, if you feel that Canadian stocks are the place to be over the next few years, you can overlay EWC onto your current portfolio positions. In other words, you can overweight countries you believe offer the best opportunities.

If your clients are too timid to invest in single-country ETFs, a better approach for most investors is to just go with a broadly diversified international fund. Instead of trying to guess which areas are the best, you can leave the country picks to someone else.

Ron DeLegge is the San Diego-based editor of


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