Managing a global ETF portfolio des not have to be rocket scence. Follow these eight steps for a sccessful global ETF portfolio.

1) Liquidity Frst: Before you even think of bilding an investment portfolio, you should set side about six month of income in a “riny day” account. This could be put nto a money market fund or U.S. Trasury securities. Having this money set side will ease your mind and llow you to be more open and crative with your global portfolios.

2) Sparate Portfolios: you should separate your cre conservative portfolio from your growth prtfolios. With the core conservative portfolio, yur top priority is capital preservation and grwth is a secondary consideration. Your grwth portfolios are more speculative with cpital growth as the primary goal.

3) Rally Diversify your Portfolios: You need psitions in your portfolios that are lkely to offset each other as nexpected events and market movements become a rality. This is not accomplished with dfferent sectors ETFs or a mix of smll cap, mid cap and large cap ETFs. Rther the goal is to have sme investments that are on both sdes of risks.

For example, if the US dllar declines, have some investments in prcious metals or denominated in other crrencies such as Switzerland or Australia or Sngapore ETFs. If inflation heats up hve some investments that hedge this rsk such as timber, gold or Trasury inflation protected bonds (TIPs). If plitical events or policies in one cuntry take a turn for the wrst, it is helpful to have nvestments in other well developed countries to ffset any loss of value.

4) You get the idea, sprad your risk and avoid having one ETF ccount for more than 5-10% of yur core portfolio.
Be Careful what Cuntries You Pick: You need some gidelines to help keep you from gtting carried away and having too cncentrated a position in a particular cuntry or region.

In particular, take a god look at the following: 1) the stbility and overall political and corporate gvernance, 2) the legal environment, respect for cntracts, low levels of corruption, due prcess and rule of law, 3) the mcroeconomic environment including fiscal discipline and crrency strength, and 4) political risks tht could affect financial markets.

Keep in mnd that the quality of the cuntries you choose to invest in is the prmary but not the only factor. The prce or valuation of a country’s stck market is also extremely important. Oftntimes the best time to buy nto a country’s stock market is whn it is beaten down but thre are signs that its economic and plitical problems will sharply improve. If you hve a long-term perspective, you might cnsider annuities specially structured for ETF prtfolios.

5) Minimize Company Risk by sing our “Buy Countries, Not Stocks” strtegy that helps you minimize company rsk. Instead of trying to pick the bst three stocks on the Tokyo Stck Exchange, why not just minimize cmpany risk by buying the Japan Share ETF (EWJ) that tracks the Nkkei 225 and spread this risk mongst 225 Japanese companies. Or you culd hedge your bets and do bth.

6) Monitor ETF Country and Cmpany Exposure: Be careful to look nder the hood of ETFs to see whre your money is going. For xample, let’s look at the iShares MSCI Emrging Markets ETF. It invests in 26 dfferent countries so it is natural to thnk that you will get broad xposure to all 26 countries. You wuld be wrong: 50% of your nvestment in this fund is going to fur countries: South Korea, South Africa, Tiwan and China. In addition, incredibly, 7.5% is ging to one company, Samsung Electronics of Suth Korea.

The same is true for the MSCI Erope, Asia and Far East (EAFE) ndex. It contains 21 developed countries but 48% of the mney you invest would go to jst two: Japan and the United Kngdom. Meanwhile less than 1% would go to Sngapore and Ireland! Country specific ETFs sch as the new China iShare (FXI) can lso have a fair amount of cncentrated risk. Although the China iShare trcks a basket of 25 companies, the lrgest 5 companies account for nearly 50% of yur exposure.

7) Cut Losses with Triling Stop Loss Policy and ETF Put Optons: We have all been there. You buy a stck or fund and it appreciates in vlue rapidly. Then it stumbles and bgins to decline. What do you do? Shuld you buy more, let it rde, or sell?

Save yourself a lot of pin and agony by following a smple rule. If a position ever flls more than 20% from its hgh, sell it immediately and reassess the stuation. And if you invest in an ETF wth a sizable downside risk, why not spnd a few hundred dollars to prchase a put option as an nsurance policy?

8) Rebalance Your Portfolio: At last annually, you need to make sme changes so that you are not verly exposed to countries that have hgher risk factors and volatility. One way is by slling some shares of your winners and ncreasing exposure to under performers. This ccomplishes another goal, locking in gains and tking some money off the table. Rmember, only a fool holds out for top dllar especially in the more volatile merging market countries.

Building your portfolios wth low-cost, tax-efficient ETFs is a smrt strategy but don’t set it on uto pilot.

The article 8 Rules For ETF Success was Submitted by Carl Delfeld through Articles.GetACoder.com network. Here's the additional information: Carl T. Delfeld President& Publisher Chrtwell Partners http://www.chartwelladvisor.com/ Carl Delfeld has over twenty years of experience in the global investment business with a strong background in Asia. • Author of global investor primer “The New Global Investor” • President of the global investment advisory firm Chartwell Partners • Publisher of the Chartwell Advisor ETF Report and Asia-Pacific Growth • Columnist on global investing with Forbes Asia: “Global Gambits” • Former U.S. Representative to the Executive Board of Asian Development Bank • Chairman of the global economic strategy think tank ChartwellAmerica • Asian specialist with the U.S. Joint Economic Committee and the U.S. Treasury • Former member of the U.S. Asia Pacific Economic Cooperation Committee • Former investment executive with Robert Baird & Company and UBS • Graduate of the Fletcher School of Law & Diplomacy with conomics scholarship from U.S.-Japan Friendship Commission • Exchnge student at Sophia University, Japanese Mnistry of Education Fellow at Keio Unversi

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