Foreign Small Caps: Choose Actively Managed Funds or ETFs?

ETFs turn their eyes to the international market. But they may not be the best choice for investing in small foreign companies.

Exchange-traded funds have proliferated like rabbits. You can now buy these funds, which trade like stocks and track a particular index, for most types of investments. After slicing and dicing the U.S. market into plenty of niche ETFs, financial firms have sharpened their knives to carve up overseas markets in a similar fashion.

Amid the wide selection, one newly minted ETF may be worth a look. In late April, State Street Global Advisors launched SPDR S&P International Small Cap (symbol GWX). It holds stocks of companies in developed markets with market capitalizations below $2 billion. Countries with the most stocks in the fund include Japan, U.K., Canada and Australia. Managers aim to mimic the performance of the S&P/Citigroup World Ex US Cap Range

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Contributing Editor, Kiplinger's Personal Finance