Exchange Traded Funds (ETFs)

Offering Cost-Effective Solutions to International Investing

Many investors use exchange-traded funds (ETFs) to diversify their holdings and reduce portfolio risk. However, another value to ETFs that funds like the Fidelity International Value ETF (FIVA) tap is to trade international securities without paying extra to a stock broker.

Domestic and international markets can act like a seesaw in relation to one another. When one is showing relative strength, investors tend to pour into that market and ignore the other one, only to do the opposite if the uptrend swings the other way. Investors who want to get in on solid international equities without having to buy specific companies, including some that are probably unfamiliar to the average investor, will find ETFs the most sensible way to invest globally in a cost-effective way.

The Fidelity International Value ETF looks for international securities that historically are undervalued and have the potential to rise in price when the market comes around to those types of investments. In general, this investment strategy typically means that FIVA will have a significantly lower amount invested in growth-oriented technology stocks than you would normally find in an ETF with a broader scope.

This fund specifically focuses on large- and mid-cap companies in developed overseas markets. Considering this criteria, it shouldn’t be a big surprise that the country most represented among FIVA’s holdings is Japan, as this country’s market has been undervalued for many years compared to international averages.

FIVA came into existence on Jan. 16 of this year and has not performed terribly well since, losing more than 12%. However, this decline largely can be attributed to the overall market environment of the last six months, where a weakening international bull market has been competing against a rising U.S. dollar and strong domestic economy. Considering the low current price, FIVA’s dividend payouts should amount to a 3.84% annual yield. With only $14 million in assets, the fund is fairly small, but investors who are interested in it may find the share-price dip to offer a good entry point.

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The top holdings of FIVA include Royal Dutch Shell Plc B shares (RDSB), 2.22%; Nestle SA (NESN), 1.91%; Babcock International Group Plc (BAB), 1.87%; Toyota Motor Corp., 1.69%; and Nippon Telegraph & Phone Corp., 1.54%. The top 10 holdings are allocated about 16% of total assets.

The most prominent sectors in this fund’s holdings are financial services, consumer cyclical, industrials and consumer defensive, with investments primarily in Japan and European markets.

For investors looking for a way to combine value investment strategies and developed international markets, the Fidelity International Value ETF (FIVA) is a simple, and low cost, way to accomplish that goal.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.