The following is just notes to myself, not advice to anyone else, on the theory that, if I can explain it to someone else, I can explain it to me. ROTFL
Most American investors stick with their home market, and there are good reasons for doing so. E.g., even an stock that’s an American icon, like MCD, makes a lot of its money overseas (though not so much in Russia these days as before. LOL) But country funds have always intrigued me, especially exotic markets like India, Pakistan, Nigeria, Turkey, and I’ve always bought a few shares of them, as much for bragging rights as to turn a hoped-for profit. But this coming year, I’ve decided to launch a serious campaign and to make country funds one-third of what I trade. (Another third will focus on commodities. The remainer will be Chef’s Choice.)
The list of country funds at Seeking Alpha is as good a place as any to begin. Countries | Seeking Alpha
The one change I’d make is to swap in RSP for EUSA --their choice to represent the US market-- for RSP being more liquid. But the rest of the list is good enough for a beginning. In fact, as of market open, I’m now long two on the list and ITM on both and up on my commodity trade as well, and cut my loss on an industry bet at (-3.3%).
What you’ll find, if you pull schedules of holdings for the funds, is that some of the funds do give access to a broad sample of the companies domiciled in a specific country. Others are just the usual cap-weighted nonsense, which means that --if you don’t look under the cover-- you might be making a very focused bet on just a few stock, such that, you’d be better off just buying the ADRs directly and trading them instead.
What you’ll also find is that some of the funds are extremely illiquid, not that that problem doesn’t have work-arounds. Related to that, of course, is that spreads for some of the funds are extremely wide.
A third problem is “co-variance”. Many of the funds don’t track much differently than the US market. Hence, buying them offers little diversifiation. Which those are is easy to discover by doing comparison overlays or by building correlation matrices. (Here’s a link to the easiest place to do that. Asset Correlations)
Now we come to which chart(s) to use for trading the funds. I think two are needed, but just two: one for ‘analysis’ and one for ‘execution’. Let’s 'consider analysis first.
You want to be buying the foreign markets that are out-performing the US broad market --for which an equal-wight SP500 index might be a fair proxy, but not a cap-weighted version, 25% of whose current performance is due to just 7 or 8 stocks. But you want to be buying the ones offering a truly positive return, not just the ones not doing as badly as the US market. LOL
BarChart offers three comparison indicators. It’s Chef’s Choice which you choose, if any. My preference is the Mansfield Indicator (used by my investing/trading hero, Stan Weinstein). Here’s an example chart.
(to be con’t. I’ve gotta grab breakfast.)
