SPDR International Small Cap (GWX) Offers True Diversification Against U.S. Volatility

Posted by Sr Financial Analyst at 2/22/2008 2:55 PM and is filed under ETF
By: Nathan Slaughter
Editor, The ETF Authority
Learn more about The ETF Authority (click here)
Published: February 22, 2008
As the U.S. market has suffered a sharp correction in recent months, many financial pundits have been recommending that investors protect their assets by stashing them overseas. Unfortunately, while this strategy sounds great in theory, it usually doesn't work out too well when put into practice.

In today's global economy, if the U.S. sneezes, international markets are usually quick to catch a cold. For example, after the Dow Jones Industrials tumbled nearly 700 points from January 14-18, foreign exchanges quickly followed suit — plunging the following Monday.

Tokyo's Nikkei 225 Index retreated -4% on the day, major benchmarks in London and Paris registered declines of around -6%, Germany's blue-chip DAX 30 shed -7%, and India's SENSEX was down as much as -11% at one point. That frenzied sell-off dashed hopes that stocks in faster-growing nations in Europe and Asia might become decoupled from those in the U.S.

However, there is one group that doesn't always march to the beat of the U.S. drum — foreign small-caps. SPDR S&P International Small Cap (AMEX: GWX, $30.38) offers exposure to a broad basket of 500 small and mid-size stocks culled from markets all over the world. Japan soaks up most of the portfolio's assets (30%), followed by the U.K. (12%), Canada (11%), Australia (9%), and Korea (5%). However, this is a far-reaching international fund, with a stake in countries ranging from Italy to Luxembourg.

Those looking for a fund that truly offers some diversification against U.S. volatility will find it here — with a low beta of just 0.32. But diversification isn't all you'll get. As of last September, the fund's index had posted impressive 5-year annualized gains of +30.0%, trouncing both the S&P 500 and the Russell 2000.

Of course, I don't mean to imply that the fund will emerge from a global economic slowdown unscathed, or that shareholders should grow accustomed to the sizzling gains of recent years. However, long-term shareholders looking to cash in on the growth of up-and-coming companies from around the world should be pleased.


Nathan Slaughter
Editor
The ETF Authority

About The ETF Authority

 The mission of The ETF Authority is to help our readers identify today's most profitable ETFs and closed-end funds. (Learn More)

About Nathan Slaughter

Nathan Slaughter has developed a long and successful track record over the years by investing in both exchange-traded funds (ETFs) and deeply discounted value securities. When it comes to ETFs, Nathan has created a proprietary ranking system that helps him zero in on today's most promising funds.

Nathan's previous experience includes a long tenure at AXA/Equitable Advisors, where he provided comprehensive investment advisory services to small businesses and high net-worth clients. He also honed his research skills at Morgan Keegan, where he performed asset allocation, retirement planning, and consultative portfolio management services.

Several years ago Nathan switched gears and decided to devote his time exclusively to financial analysis and writing. He has since published hundreds of articles for a variety of prominent online and print publications, and he now writes exclusively for StreetAuthority.com.

Nathan's educational background includes NASD series 6, 7, 63, & 65 certifications, as well as a degree in Finance/Investment Management. He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley. 

To learn more about Nathan Slaughter's premium investing newsletter — The ETF Authority — please visit this link.


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