Pick Just One?

A reader left a comment about his new found interest in foreign investing and concluded with this question;

If I had to move into 1 country, which one do you think it should be?

Tough one.

Limiting to just one country is not such a great idea. I think the question behind the question might be my opinion of a priority of what countries to own. Even that is a tough one. All of the countries I own have specific purposes for being there.

A very important theme is commodity based developed countries like Canada (oil), Australia (most other resources), New Zealand (timber) and Norway (oil). It would be tough to pick one over the others but my gut says Canada might lead due to that markets exposure to oil sands. That is a guess however and I own all four. My exposure for most clients is just common stocks but a few own iShares Australia (as do I).

I own Brazil, Chile and South Africa as commodity based developing countries. Here I use common stocks or ADRE (personal holding).

I don't necessarily own materials companies from these places but the economies rely on supply and demand for commodities.

I also have exposure to India and China. Either one is likely to be the next economic super power. For India I use a CEF and for China, one of the oil stocks.

Clients own Teva which is more of a bottom up healthcare pick but it is Israel as well.

From a top down standpoint my exposure to Europe is probably my least important foreign exposure. I say this because of my theory that western Europe as a mature service based economy has a tighter correlation to the US than other places.

But in Europe I have England, Ireland, Switzerland and Sweden. Sweden is a little different because it has a lot of timber. These countries I just have common stocks.

As a caveat I'm sure I'm forgetting a couple.

In trying to maintain a diversified portfolio all of these places play a role. One over the others really is not ideal. In a portfolio of just a few equity ETFs maybe Australia is the best choice for diversification? Watch out though because the Australian market, and by extension iShares Australia, has a heavy weight to financials and it would be easy to end up with too much exposure.