Diversify Your Portfolio with ETFs from Latin America

Latin America map
Latin America
Investing a small portion of your portfolio in Latin America with ETFs is a good way to diversify your portfolio in emerging markets. Latin America has a wealth of natural resources that other countries need and Brazil is the 7th largest economy in the world. Currently in early 2016, the Brazilian Bovespa Stock Index is up and Brazil could finally see an improving economy along with a new president.


You can invest in Latin America with Latin America ETFs or you can invest in individual countries in Latin America. The economies of China, India and the United States can also have an influence on Latin American companies, especially companies that are involved in infrastructure, minerals and metals. All of these ETFs would be considered as investing in emerging markets and a good way to diversify your portfolio.


Latin America ETFs

  • iShares Latin America 40 Index (ILF) invest in companies that are in the S&P Latin America 40 Index. ILF currently allocates 47% in Brazil, 35% in Mexico, 11% in Chile and 4% in Peru.
  • SPDR S&P Emerging Latin America (GML) invests in many of the same companies as ILF does.
  • Global X FTSE Andean 40 (AND) invests in companies of the Global X FTSE Andean 40 Index. This index is comprised of the largest companies on the Peru, Colombia and Chile stock exchanges. Its main holdings at this time include Southern Copper Corp, Credicorp and Enersis America.
 
ETFs for Individual Countries in Latin America
 
If you do not want to invest in all of Latin America, there are ETFs for several Latin American countries to invest in. Several Latin American countries have stable and business friendly governments, but you always have to pay attention to their economic and political situations.
 
ETFs for Brazil

  • iShares MSCI Brazil Index (EWZ) is the largest ETF for Latin America with $9.65 billion in assets. EWZ invests in mainly in stocks that trade on the BOVESPA Exchange.
  • Market Vectors Brazil Small-Cap (BRF) invests in small cap companies of Brazil which will give you investment exposure to more domestic Brazilian companies.
  • iShares MSCI Brazil Small-Cap (EWZS) invests in stocks of the MSCI Brazil Small-Cap Index.
  • Global X Brazil Consumer (BRAQ) invests 88% of their assets in consumer defensive and consumer cyclical stocks of the Solactive Brazil Consumer Index.
  • Global X Brazil Financials (BRAF) invests 86% of their assets in financial and real estate companies and tracks the Solactive Brazil Financial Index.
  • Global X Brazil Mid Cap (BRAZ) tracks the Solactive Brazil Mid Cap Index and invests in companies like CPFL Energy, Tim Holding Co., and Ultrapar Holdings.
 
Inverse and Leveraged ETFs for Brazil

  • ProShares Ultra Short MSCI Brazil (BZQ) is a 2x inverse ETF that corresponds to 200% of the inverse of the MSCI Brazil Index. This would be the ETF to trade during the times you believe the Brazilian markets will drop.
 
 ETFs for Mexico
 
iShares MSCI Mexico Investable Market Index (EWW) invests 90% of its assets in stocks of the MSCI Mexico Index and has a 5-star rating from Morningstar. EWW top holdings include America Movile, Wal-Mart de Mexico, Grupo Mexico and Fomento Económico.
Inverse and Leveraged ETFs for Mexico

  • ProShares Ultra MSCI Mexico (UMX) tries to replicate twice (200%) of the MSCI Mexico index daily performance.
  • ProShares Ultra Short MSCI Mexico (SMK) attempts to replicate 200% of the inverse of the daily performance of the MSCI Mexico Index. You would use this ETF to short the Mexican stock market.
 
ETF for Peru
 
Peru has a good economy with a 5.4% GDP and one of the highest per capita incomes in Latin America with only one negative GDP year in the past two decades. Peru also has a great deal of natural resources.

  • iShares MSCI All Peru Capped Index (EPU) is 64% invested in mining and basic materials companies at this time. Their top holdings include Credicorp Ltd, Southern Copper Corporation and Fortune Silver Mines, Inc.
 
ETF for Colombia

  • Global X FTSE Colombia 20 (GXG) tracks the FTSE Colombia 20 Index and has a 5-star rating from Morningstar. Its top investments include Ecopetrol S.A., BanColombia SA and Isagen
ETF for Chile

  • iShares MSCI Chile Investable Market Index (ECH) has invested at least 90% of its assets in companies of the MSCI Chile Investable Index.
 
ETF for Argentina

  • Global X FTSE Argentina 20 (ARGT) is a low volume ETF.
 
Invest in Latin America Conclusion
 
If you want to invest in Latin America, these ETFs will give you good exposure to Latin American countries and can diversify your portfolio into these emerging markets with their growing economies and wealth of natural resources. At this time, the most popular Latin American ETFs are EWZ (Brazil), EWW (Mexico) and Latin America (ILF).

Copyright © Sam Montana March 2016
 

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