For decades, American investors had little reason to send their assets on an overseas journey. Our own stock market offered solid long-term returns with acceptable volatility.   By contrast, international investments tended to fall into one of two categories: slow-growth bores (European and, recently, Japanese stocks and bonds) or boom-and-bust roller coasters in emerging markets.

    Times have changed.

    Although the U.S. economy remains the world's mightiest, the forces of globalization have helped create attractive investment opportunities throughout the world, including in places previously considered only by the most adventurous financial explorers.  The end of the Cold War, the near-universal acceptance of capitalism and the ubiquity of online and wireless communication have resulted in falling trade barriers, rising liquidity and truly global markets.

     In the 21st century, limiting one's portfolio to U.S. stocks is akin to keeping your television tuned to one channel -- you'll find some enticing offerings, but you'll miss out on so much more.

     Now is also a perfect time to diversify your portfolio away from U.S. stocks.  After all, the U.S. economy has continued to slow in 2008, and all signs point to a possible recession in the coming months.  In fact, we might already be in the midst of one.

     Between the mortgage mess and the credit crisis . . . record oil prices and nagging inflation . . . the budget deficit and the trade gap . . . it all adds up to a pretty strong headwind for U.S. investors.  Fed Chairman Bernanke has said so himself. 

     The highest one-year gain the S&P 500 ever reported was +45% -- and that was a lifetime ago . . . in 1954.  In 2007, the S&P 500 didn't even crack the top 50, coming in 76th out of the world's 90 major stock-market indexes.

     Bottom line -- the underperformance of the U.S. market is by no means a short-term phenomenon.  Our domestic market has been sluggish for decades.  And due to a series of missteps by U.S. economic policymakers, the performance gap between the U.S. and the rest of the world has continued to widen.

     For example, from 2003 through 2007 the S&P posted a total return of +83%.  But once again, foreign markets cleaned our clock.  Egypt's index gained +1,588%, the Ukrainian market notched +1,572% and Peru added +1,031%. Brazil was up +781%, Hong Kong, +435% . . . even Norway saw +434% returns.  (The list goes on and on.)

     The problem is that most investors have trouble getting into these markets.  For complete access, an investor would need to find the country to invest in, do the necessary fundamental research on the best companies available in that market and then open a specialized international brokerage account.  Then, you'd have to pay steep commissions to execute your trade.  And finally, you'd have to deal with the added hassle of foreign taxes.

      Whew!  That's a lot of work, a lot of cost and most importantly, it can lead to a lot more risk than most individual investors want to bear.

     The solution to all of this is ETFs.

     They eliminate the need for a new brokerage account since they can be bought just like normal stocks -- on the major U.S. exchanges.  They also eliminate the burdensome fees that are often charged by international brokers.

     Thanks to ETFs, a plethora of booming markets and fast-growing economies on the other side of the world are now literally just a mouse click away.

     Take India as an example: We've identified a single ETF that gives you access to a full 123 different securities on the Indian stock exchange.  These include some of the world's best-performing stocks in recent years -- exotic names like Bharti Airtel (up +1,752% since 2003) and Jindal Steel and Power (up +3,786% since 2003).

     U.S. investors couldn't touch these stocks a few years ago.  But thanks to the introduction of several new India-focused ETFs, hundreds of these Indian money-making juggernauts are now finally within your grasp.

     It's just another great example of the power of ETFs.  Let them grace your portfolio and you'll gain instant access to stocks in far-flung markets like India, China, Brazil, Singapore and Russia.  These are the kinds of opportunities U.S. investors could only dream about a few short years ago.

     And with more than 500 ETFs focused on foreign markets, investors have plenty of chances to profit from the international investment boom.  Fifteen of the top 20 ETF performers over the last five years were focused on non-U.S. stocks.  Meanwhile, 39 out of the top 50 over the same time frame were internationally oriented.    

     You can imagine the returns these outperforming ETFs have brought home thanks to the significant gains notched by foreign markets.  Leading the charts is one of our favorites -- an ETF focused on Brazil.  Over the last five years this fund returned +702%.  Meanwhile, other top-flight foreign ETFs saw gains of +462%, +509%, and +608%.  Thanks to the ETF revolution, investors can now access these returns without ever leaving the comfort and convenience of the U.S. stock exchanges.

     Best of all, it's not too late for you to get in on the action.  The experts estimate China will deliver +10.1% GDP growth in 2008.  India should grow +7.8%, Peru +7.7%, Russia +7.1%, Indonesia +5.8%, Argentina +6.2%, Venezuela +6.1%, Singapore +5.0%, and Brazil +4.7%.  So while the U.S. economy continues to take a beating, many international markets should continue their money-making ways for investors -- and ETFs are the best way to profit.

     You know they can generate income.  You know they can help you profit from booming foreign markets.  But ETFs have one more trait that make them a triple threat -- sector-focused investing.

     In fact, during tough times for the market, focusing on winning sectors can be one of the only ways for investors to profit.

     Consider the period from July 2007 through July 2008.  If you're like most investors, your portfolio felt the brunt of the subprime crisis, rising oil prices, and the threat of inflation.  But if you're an ETF investor focused on the right sectors, your portfolio never looked better.

     Thanks to booming markets like agriculture and energy, many sector-based ETFs are sitting on triple-digit gains over the last year.  Coal, agriculture, oil, gold, industrial metals -- among many other groups -- have all delivered heady gains in recent trading.  As you can see from our chart, the ETFs focused on these sectors have followed suit.

     These returns aren't just a flash in the pan, either.  The steel sector has enjoyed +57% annualized returns for the past five years, while agrochemical has shot up +52% annualized. Coal seems like a laggard compared to those winners -- it's only up +43% annually over the past five years.

     We all know certain industries and sectors rise above others, but many investors don't know how to directly profit from this phenomenon.  After all, it's a little tough to buy 100 barrels of oil and store them in the backyard as an investment.

     ETFs are the answer.  With more than 1,450 choices, these focused money-makers can help you zero in on industries as broad as oil, steel, and financials, all the way down to narrow niches like nuclear energy, gaming, and luxury goods.

     Just about every industry you can think of now has an ETF linked to it, and with more than 320 new funds awaiting SEC approval, the choices are set to increase dramatically.

     So no matter what happens to the overall market, thanks to the recent explosion of sector-based ETFs, you'll always have plenty of profitable investment choices at your fingertips.

     And with the dramatic economic changes ongoing throughout the world, there are plenty of sectors that should see impressive gains in the years ahead...

     This is shaping up as the best time in decades to invest in energy and other must-have commodities.  For the first time since the 1970s, virtually the entire world is growing.  So even with growth slowing here at home, the rapid growth of China, India and dozens of other nations from Eastern Europe to Latin America is increasing the strain on the supply of raw materials.

     China's blistering economy just clocked in at a mind-boggling +10% annual growth.  If China keeps growing at its current rate, in just five years it will need +61% more raw materials than it does today.  Growing economies mean one-way rising demand for natural resources.  We all know rising demand leads to higher prices... and higher returns for the many ETFs focused on natural resources.

      Record-high oil prices mean even more opportunity, especially in ETFs tracking nuclear, wind, solar or other alternative-energy plays.  Seeing the crimp high prices have put on the economy, governments and businesses will take proactive steps to guard against future energy shocks, even if oil prices fall. And if oil keeps rising, it will drive investment into this arena even faster. To complete the triple threat, expanding alternative energy use is on the platform of both presidential candidates; this sector will be a beneficiary no matter who is elected to office in November.

     With so much interest in the area, a number of alternative-energy ETFs have hit the market in the past few months, allowing easy access to this sector's future gains.  We recently added one enticing alt-energy ETF to our "Sector Plays" Portfolio -- a new fund focused on wind power. With wind power in the U.S. growing at a +45% clip last year, we think early investors may be sitting on a triple-digit winner.

     In short, during what is a difficult time for most, ETF investors are reveling in the unprecedented chance to profit from dozens of booming sectors. . . no matter where the broader markets go.    

More Good News for ETF Enthusiasts

     We've never understood how investors could chain themselves to only common stocks, especially after seeing the high monthly income and triple-digit capital gains that await them with ETFs.  It's like shopping in one aisle of the supermarket for your entire life.  Your portfolio is bound to suffer from malnutrition.  Why not try the buffet approach to investing . . . where you can flit from market to market, sector to sector, feasting on the highest yields and hottest securities in each?

     That's why we created The ETF Authority -- an entire newsletter dedicated to identifying the most profitable income, international and sector ETFs available in today's market.

     We understand that some investors may be wary of taking the plunge into the exchange-traded fund world -- and we know our ETF Authority newsletter will not be for everyone. However, thanks to their market-crushing gains and rock-bottom expenses, ETFs offer savvy investors, hands-down, the best method for capturing steady double-digit income and gaining easy access to some of today's most promising sectors and foreign markets. 

     The ETF Authority is scheduled to open up to new subscribers in a few short days. We'd like to invite you to join our V.I.P. list so you'll be the first to know when we're ready to welcome new subscribers to this exclusive service. There is no charge and no obligation to join our list.  Sign up today, in fact, and we'll take $100 off the subscription price and send you the answers to the top ten questions about investing in ETFs. Follow this link to learn more.

Good investing!

Nathan Slaughter
Editor -- The ETF Authority
StreetAuthority.com
839-K Quince Orchard Blvd. 
Gaithersburg, MD 20878-1614

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