Buy the World, the Easy Way
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some global operators to your portfolio, the Vanguard Total World Stock Market Index ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.47%. (Vanguard is known for low fees.)
This ETF has performed reasonably, but it's also very young, with just a few years on the books. It underperformed the S&P 500 in 2008 and 2010, though it beat it substantially in 2007 and 2009. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 25%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
It's a smart idea to diversify your holdings not only by market size and industry but also geographically. If the U.S. economy stalls or slides, other economies may still be performing well, and could help offset losses in your portfolio.
More than a handful of global companies, based in the U.S. and abroad, had strong performances over the past year. (Remember, too, that many huge American companies do a lot of business abroad, thereby offering international exposure.) Oracle , for example, gained 24%, recently hitting a 52-week high. It has been successfully shifting its focus from hardware to the cloud computing realm. It has been posting double-digit revenue and earnings growth rates over the past few years, though revenue has shown some signs of softness. The company's hardware business hasn't been doing as well as software recently.
General Electric advanced 19%, expanding its work in mining and alternative energies, and offering a tasty 3.4% dividend yield. It recently posted market share gains in wind power in Germany and revealed plans to expand its locomotive business in Europe. Many expect good things from its involvement in nations such as China and India, too. In the company's latest quarter, its financial arm was particularly impressive.
BP gained 5%, tackling debt repayment and its legal liabilities from the big 2010 Gulf of Mexico spill by selling off assets to raise tens of billions of dollars. The U.S. government is reportedly looking for at least $18 billion from BP, and there are reports that a major settlement may be near. Putting the spill and the uncertainty over its ultimate cost behind it should only help BP's stock. Meanwhile, bulls like its investments in wind power and biofuels, its rising dividend, and its recently secured permission to ship U.S. crude oil to Canada. Troubles in Algeria, though, remind us that much of the world isn't as stable as the U.S. The company has evacuated hundreds of workers there.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Vodafone shed 1%. The U.K.-based telecom giant has bulls excited about the projected growth of 4G technology and Vodafone's Smart II low-cost, mass-market smartphone. Others are wary of uncertainty and don't see the stock as a bargain. More pluses include its 45% interest in Verizon Wireless that has generated billions in cash and its entry into the promising mobile payments market.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
The article Buy the World, the Easy Way originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool recommends Vodafone. The Motley Fool owns shares of General Electric and Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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