Geographic ETF Strategies: Diversify Your Portfolio by Region

Among the many different strategies that can be used with ETFs is the strategy of trading by geographic location. As you may already know, there are a number of global economies. These economies don't all behave or perform the same. Although most economies move in tandem to one another, there may be a discrepancy allowing investors to reap benefits by investing overseas.

With the ETFs that focus on the global location of funds, such as by country or geographic region, you are able to diversify international portfolios and trade them with exchange-traded funds.

The portfolio strategy entails positioning your portfolio to weight the allocations based on the strength of the global economies. For example, you may have an Asian ETF, a European ETF and an Americas ETF. Currently (in 2010), the Asian area ETF would be the strongest, with the European and Americas regions following. That means that you would weight the Asian ETF the highest with the other two regions following based on the economies' strength as well as future prospects for growth.

What's great about this strategy is that it involves pure economic research and less estimating of a single stock's or industry's potential.