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Diversify Globally with S&P's International Sector ETFs

Learn How to Invest in International Sector ETFs

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Exchange-traded funds ("ETFs") give everyday investors an easy way to buy into otherwise difficult to purchase assets. For international investors, ETFs can provide exposure to global equities that would be difficult to otherwise buy with a U.S. brokerage account. Many investors are familiar with broad global equity ETFs, like the iShares MSCI EAFE Index ETF (EFA), but relatively few are aware of the more niche international sector ETFs available.

In this article, we'll take a look at several international sector ETFs, designed to provide global exposure to individual sectors, such as healthcare, utilities and consumer staples.

Investing in International Healthcare

Healthcare represents a growing opportunity around the world, particularly in developed countries where populations are aging and more treatments are required. International investors looking for exposure to the industry outside of the U.S. may want to consider international healthcare ETFs like the SPDR S&P International Health Care Sector ETF (IRY).

The ETF seeks to provide investment results that correspond to the total return performance of the S&P Developed Ex-U.S. PMI Health Care Sector Index, which tracks the health care sector of developed global markets outside of the U.S. With total net assets of $32.42 million, as of February 2013, the ETF holds a diverse set of 258 equities with a 0.5% gross expense ratio.

Investing in International Utilities

Utilities are popular investments given their traditionally predictable income, which results in stable earnings, growing cash flow over time, and higher than average dividend yields compared to most other equities. International investors looking for exposure to the industry outside of the U.S. may want to consider the SPDR S&P International Utilities Sector ETF (IPU).

The ETF seeks to provide investment returns that correspond to the total return performance of the S&P Developed Ex-U.S. BMI Utilities Sector Index, which tracks the utilities sector of developed global markets outside of the U.S. With total net assets of $26.5 million, as of February 2013, the ETF holds 82 equities with a 0.5% gross expense ratio.

Investing in International Consumer Staples

Consumer staples are known among investors for being reliable stocks that typically pay dividends. While they may lag other sectors during upswings, they tend to outperform during market downturns. International investors seeking exposure to the industry may want to consider the SPDR S&P International Consumer Staples ETF (IPS).

The ETF provides investment returns that correspond generally to the total return performance of the S&P Developed Ex-U.S. BMI Consumer Staples Sector Index, which tracks the consumer staples sector of developed global markets outside of the U.S. With total net assets of $24.26 million, as of February 2013, the ETF holds 111 equities with a 0.5% gross expense ratio.

Other International Sector ETFs

While the three ETFs discussed in this article are the most popular options, based on their total assets under management, S&P offers several other international sector ETFs that investors can use to diversify into various industries. However, investors should be aware that these funds are less liquid and may therefore involve added liquidity risks.

These ETFs include:

  • SPDR S&P International Technology Sector ETF (IPK)
  • SPDR S&P International Industrial Sector ETF (IPN)
  • SPDR S&P International Telecom Sector ETF (IST)
  • SPDR S&P International Financial Sector ETF (IPF)
  • SPDR S&P International Consumer Discretionary Sector ETF (IPD)
  • SPDR S&P International Energy Sector ETF (IPW)
  • SPDR S&P International Materials Sector ETF (IRV)

Key Takeaway Points

International sector ETFs provide a great way for investors to build international exposure to individuals sectors into their portfolios. With 10 different options, S&P's SPDR International sector ETFs are among the most popular options. Investors should be aware, however, that limited liquidity in many of these ETFs adds some risk to consider.

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