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By Jeremy Glaser and Samuel Lee | 11-14-2012 12:00 PM

Our Picks for Global ETF Exposure

Low-volatility strategies look attractive for developed-markets exposure today, says Morningstar's Sam Lee.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here today with Sam Lee. He is the editor of the Morningstar ETFInvestor newsletter. We're going to look at some of his favorite picks for exchange-traded fund global investing. Sam thanks for talking with me.

Sam Lee: Thank you for having me here.

Glaser: So let’s look at some good options for investors who are looking for that global exposure. Let’s start in Europe and some of the developed markets. What are some of your favorite funds there?

Lee: So right now I like minimum-volatility ETF's. So the iShares MSCI EAFE Minimum Volatility ETF is probably my favorite place to be right now for developed markets. All it does is it tries to screen for lower-volatility stocks, and historically in the back test it’s had about one third to one fifth less volatility in the market-weighted EAFE Index.

Low volatility is a really compelling strategy because it seems over the long run low volatility strategies will offer you above the market return, but with about less risk. So I think it’s really promising strategy to apply especially in the more volatile markets right now.

Glaser: So if you’re little bit worried about the sovereign debt crisis, you are worried about the potential for disruption there, that might provide a little bit of protection?

Lee: Yes, so this is more of a cherry on top. If you're really worried about the sovereign debt crisis in Europe, I would not advise you to try to time the market in and out, to shift from more aggressive to defensive equities. Not very many people can do that successfully. So I think the minimum-volatility ETF is a good strategic choice. It's something that you’re going to hold for multiyear periods, not something that you're going to hold just for one year or until the sovereign debt crisis cools down.

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