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Foreign stocks simply can't be ignored. Thirty years ago,
U.S. markets accounted for about 70% of the world's stock
market capitalization. That figure has fallen to about 40%
today and is likely to keep falling with the rise of Brazil,
India, China and others.
Investing in only the U.S. has become akin to going to a
supermarket and shopping in only half the aisles. And if
you're an income investor the situation becomes even more
dire when you consider that many of the world's
highest-yielding stocks trade abroad.
But thanks to the rise of exchange-traded funds (ETFs) and
closed-end funds (CEFs), gaining foreign exposure -- and the
high yields that come along with it -- is as easy as buying
a common stock on the New York Stock Exchange. Thanks to
these funds, today's investor has easy access to some of the
best income opportunities around the globe.
Higher Yields Overseas
You may be surprised to learn just how low-yielding the U.S.
markets are compared to their international counterparts. In
fact, the average dividend yield of companies in the S&P 500
is a paltry 2.8%. Compare that to many other developed
foreign countries. New Zealand averages a 6.1% yield...
investors see 5.6% in Spain... 4.6% in the U.K... 4.0% in
Taiwan... the list goes on.
For years investors ignored this disparity -- investing
abroad seemed complicated, expensive and geared only toward
the professionals. But with the rise of ETFs and closed-end
funds, the barriers are falling.
Easy Access Through Funds
You don't need to open an offshore account to capture these
higher yields overseas. It's not necessary to buy securities
on foreign exchanges. All you need to do is buy one of the
hundreds of international ETFs/CEFs offered on U.S.
exchanges.
Today you can find funds with a focus on anything from
gaming stocks to foreign small-caps to entire market indices
-- and everything in between. Luckily for income investors,
there are more than 115 that focus on dividends in
international markets.
And these funds can be purchased through any full-service or
discount brokerage account. They can be bought or sold
any day at any time the markets are open, just like a stock.
Best of all, the commissions are the exact same as if you
bought shares of Coca-Cola.
With each fund share, you'll own a small piece of every
stock the fund owns. Funds invest in dozens and sometimes
hundreds of foreign issues that are often spread across
different countries and geographic regions. But you can also
buy into funds focused on one small niche of the market,
such as China, India or Russia.
Perhaps most important is the professional management that
comes along with some funds. While ETFs usually don't change
their holdings much and passively track an index, closed-end
funds have entire staffs whose job it is track down
attractive investments.
Do you know which promising Chinese corporations offer high
yields on debt or which European utilities are undervalued?
Many funds employ a staff of professionals that have the
resources and expertise to sniff out the best opportunities
in foreign lands. And all of this for only a small fee
(usually less than 0.75% annually).
But the real draw for income investors are the paychecks...
Get Paid Monthly
Right now I count 117 funds that focus on the international
markets and have yields above 6%. And I've found a total
of 64 yielding above 10%.
I've even found a few of these international funds yielding
upwards of 15%!
This goes to show just how great of an opportunity
international income investors have with funds. But it gets
even better...
Historically, many international companies make payments
only twice a year. Here in the U.S., income investors expect
at least quarterly paychecks -- and many prefer to be paid
monthly. ETFs and CEFs are happy to oblige. In fact, of the
117 international income funds I found yielding above 6%,
only three pay less than quarterly. And 55 actually
pay you each month!
It's easy to see why income investors have been flocking to
international funds to get their fix. When you can capture
the higher yields offered overseas while getting paid
monthly, the choice is a no-brainer!
Tom Hutchison
Carla Pasternak's Dividend Opportunities
P.S.
-- My colleague Carla Pasternak has a newsletter dedicated
solely to finding highest yields abroad -- High-Yield
International.
To learn more,
visit this link.
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