Latin American Exchange Traded Funds

Exchange Traded Funds (ETFs) are all the rage these days. There are good reasons for it. ETFs can be traded like a stock, yet they are a form of index funds. They are more tax efficient than typical mutual fund. Most importantly, they allow us to focus our investments on very specific regions or even countries - something mutual funds do not do.

Latin American Exchange Traded Funds

In this spirit of making focused investments, this lens concentrates on Latin American and South American ETFs. Sadly, we do not have as many choices as one would expect, but on the positive side, one of the best performing ETFs falls into this category.
So what are the ETFs in question?
ILF, MXE, EWZ

Brazil ETF - the superperformer

Brazilian economy has been on a tear for the last few years. With the commodities boom, Brazil, rich in mineral resources, has done very well.
One of the BRIC countries, it constitutes (along with India) the democratic and law abiding half of the BRIC ( the other two, Russia and China are dictatorships, where rule of law does not exist).
This makes Brazil an attractive market for investments. Being in South America, it is reasonably close to US, and away from major conflict areas in the world. As a result of these favorable factors, Brazilian economy has been doing well, and Brazilian ETF - ticker symbl EWZ - has had superb performance over the last few years - since January 2003 to January 2008 it is up 1000%.

Latin American ETF - no slouch either.

The Latin American ETF - ticker symbol ILF - is a large cap fund, tracking the S&P Latin America 40 index. It has done very well during the last few years. Since May 2003, it is up over 600%.
If you want exposure to Latin American economy,
and want to hold large, rich companies - this is the way to go. Since it is not a single country ETF, it gives you more diversification accross the region.

Mexico ETF - a mixed bag.

Mexico ETF - ticker symbol MXE is an Equity and Income etf. Since January 2003, it is up over 300%.
However, due to low trading volume, it can be quite volatile. As of April 2008, it is trading at roughly $25 - but within past 12 months, it was as high as $51 - so it has lost 50% of its value.
Thus if you decide to bet on MXE - be sure to have your protective stops in place.

More info about ETFs

Unfortunately, ETFs come with some flaws - not all ETFs share all the flaws, but it is important to know what to watch out for.
There are 3 categories of flaws that one needs to think about:
1) low liquidity
2) US market impact
3) index imbalance

with the exception of QQQQ, SPY and DIA, almost all
ETFs will suffer from one or more of these problems. To read a more detailed discussion of these flaws, visit ETF FLaws

Books about ETFs

The ETF Book: All You Need to Know About Exchange-Traded Funds

by Richard Ferri

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Amazon Price: $19.77 (as of 07/26/2008)

Exchange-Traded Funds For Dummies (For Dummies (Business & Personal Finance))

by Russell Wild

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Amazon Price: $16.49 (as of 07/26/2008)

ETF Trading Strategies Revealed (Trade Secrets (Marketplace Books))

by David Vomund, Linda Bradford Raschke

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Amazon Price: $13.57 (as of 07/26/2008)

Create Your Own ETF Hedge Fund: A Do-It-Yourself ETF Strategy for Private Wealth Management (Wiley Finance)

by David Fry

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Amazon Price: $37.80 (as of 07/26/2008)

Sector Trading: A Year in Exchange Traded Funds

by Jonathan Bernstein

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Amazon Price: $12.71 (as of 07/26/2008)

Sites to visit

Check out this lense for more ETF info
More about ETFs.

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Latin American Exchange Traded Funds

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