In yesterday's blog, I mentioned the growing number of ETFs available on overseas stock exchanges. I keep close tabs on new offshore ETF listings, because certain of these funds can lead to double-play profits in global markets. These gains can't always be matched with domestic ETFs. Let me give you a recent example.
Last year in my investment research letter Global Market Investor, I recommended subscribers diversify into commodity ETFs. – one of 2007’s best performing asset classed.
Finding a Commodity ETF that's Just Right
Now there are several commodity-backed ETFs listed here in the U.S. from which to choose, but I was especially attracted to one listed on the Deutsche Bourse in Frankfurt, Germany.
I told my subscribers to BUY the Market Access Jim Rogers International Commodity ETF. Now a big part of my reason for selecting this ETF is the superior characteristics of the index it tracks. Hedge fund legend and global investment guru Jim Rogers created this index himself in 1998.
In Rogers’ view, most of the popular commodity indexes are flawed, because they are too heavily weighted toward just a few resources, like crude oil and precious metals. That’s how the Rogers International Commodity Index was born.
Rogers started his own well-balanced and broadly diversified index that includes 36 different commodity futures. The commodities in Rogers’ index are weighted based on global consumption, and no single commodity has a disproportionate influence on the overall index.
This approach makes a lot of sense to me: so I bought it.
This is itself an important lesson to keep in mind when it comes to ETF investing: Remember that all ETFs are not created equal. It’s not enough to buy the name alone.
Make certain before you buy, to check under the hood: examine the ETF allocation and portfolio holdings carefully to make sure you’re getting what’s advertised.
How Global Market Investor Turned a Profit Double-Play in Commodities
So the number one factor in recommending this ETF was the quality of the index itself, but a close second was a currency related concern.
As I said, the Market Access Jim Rogers ETF is listed in Frankfurt and denominated in euro, not in U.S. dollars. The dollar was still in a free-fall against the euro last year when I picked this fund. I the euro exposure of this ETF would be a great way for investors to get a currency hedge, in addition to great upside potential from booming commodity markets, all in the same trade.
I’m delighted to say that’s exactly the way things worked out. The Market Access Jim Rogers International Commodity ETF jumped a bit more than 12% in 2007, after I recommended it to subscribers in June. That’s 12% in local (euro) currency terms.
Even better for U.S. investors, the dollar continued to slide through most of last year – handing investors a 23.8% total return in this Frankfort-listed, euro-denominated ETF.
In other words, you just about doubled your total return by investing in this overseas-listed ETF, rather than one of the U.S. listed commodity ETF equivalents.
That’s a profit double-play I’ll take any day!
P.S. for more information on my service, including a full track record of past and current picks, Click here to sign up now for a risk-free trial to Global Market Investor so you can get a peak at my most recent picks - completely risk-free.
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