Small Regions Equity

Small regions equity mutual funds and ETFs invest in stocks in either... Small regions equity mutual funds and ETFs invest in stocks in either specific countries or regions of the world. For example, a mutual fund or ETF in this category may be focused on a specific country such as Australia, or it could focus on all the BRIC countries. These funds are often actively managed as they require special knowledge of foreign markets and active management may increase the chances of generating a higher return compared to an index fund or passive ETF. These funds can be attractive for investors who want to bet on a particular country or region’s growth—either as a momentum play (buying low and hoping to sell higher), or as a contrarian play (buying out-of-favor countries in the hope they regain favor with investors). Investors may also see a particular small region as a good value play—for example, a country’s stock market may be trading at a historically cheap valuation on a price-earnings basis. Australia is a good example of a small region. Its stock market is heavily tilted to resources and financial services (mostly banks), which makes it very similar to Canada. Likewise, Australia is highly exposed to changes in Chinese economy, because iron ore is its largest single export. Australia also has a housing market that has soared in the last two decades. Thus, an investor in an Australian equity fund is exposed to changes in commodity prices, as well as fluctuations in residential housing prices. These funds may be appropriate for aggressive investors willing to do some research to pick a country or region that can outperform in the years to come. Last Updated: 12/20/2024 View more View less

Small regions equity mutual funds and ETFs invest in stocks in either specific countries or regions of the world. For example, a mutual fund or ETF in this category may be focused on... Small regions equity mutual funds and ETFs invest in stocks in either specific countries or regions of the world. For example, a mutual fund or ETF in this category may be focused on a specific country such as Australia, or it could focus on all the BRIC countries. These funds are often actively managed as they require special knowledge of foreign markets and active management may increase the chances of generating a higher return compared to an index fund or passive ETF. These funds can be attractive for investors who want to bet on a particular country or region’s growth—either as a momentum play (buying low and hoping to sell higher), or as a contrarian play (buying out-of-favor countries in the hope they regain favor with investors). Investors may also see a particular small region as a good value play—for example, a country’s stock market may be trading at a historically cheap valuation on a price-earnings basis. Australia is a good example of a small region. Its stock market is heavily tilted to resources and financial services (mostly banks), which makes it very similar to Canada. Likewise, Australia is highly exposed to changes in Chinese economy, because iron ore is its largest single export. Australia also has a housing market that has soared in the last two decades. Thus, an investor in an Australian equity fund is exposed to changes in commodity prices, as well as fluctuations in residential housing prices. These funds may be appropriate for aggressive investors willing to do some research to pick a country or region that can outperform in the years to come. Last Updated: 12/20/2024 View more View less