The Cheapest International Trackers

When it comes to tracking international stock markets, the choices for investors have increased greatly in recent years, but how can you do it cost-effectively?

Following on from my recent article on UK-focused index trackers, today I'm looking at the international trackers that are available. There's a huge range of funds on offer and, as with UK trackers, they consist of unit trusts/OEICs, investment trusts and exchange traded funds (ETFs).

I've broken the selection down by regional focus, and this is a bit subjective: I've included the iShares MSCI Eastern Europe (LSE: IEER) with the BRIC countries (Brazil, Russia, India, and China), for example, as more than half of its value is in Russia. And we could debate whether South Africa and Korea are emerging markets or developed economies. Funds focusing on particular investment styles (value, small cap, etc.) have been excluded.

In any case, investors should check the details of any fund before buying, to be sure they know what they're getting.

Global funds

Some investors want to get exposure to all the world's markets, and there are just a handful of funds tracking these.

Developed economies

Within the developed economies you have the option to track individual countries as well as regions such as Europe or North America. The cheapest funds that I could find were the db x-trackers ETFs from Deutsche Bank, specifically their DAX (Germany) (LSE: XDAX) and DJ Euro STOXX 50 (LSE: XESC), both of which have total expense ratios (TERs) of just 0.15%.

Other db x-trackers are available with charges up to 0.5%, while iShares ETFs cost between 0.35% and 0.59%, Lyxor's from 0.3% to 0.65%, and the Russell 1000 Fund (LSE: RONE) from ETFS costs 0.35%.

As regards unit trusts, the cheapest is the HSBC Japan Index Fund at 0.67%, while the cheapest focusing on Europe is the M&G Group European Index Tracker at 0.71%.

The Edinburgh US Tracker (LSE: EUS) investment trust has a TER of 0.33% and currently trades at a discount to net asset value of 3%.

BRICs

I've separated the BRIC economies from the rest of the emerging markets, and the only tracker I can find focusing on all four countries is the iShares FTSE BRIC 50 (LSE: BRIC), which charges 0.74%.

Other BRIC-focused funds cost are available from iShares, db x-trackers, and Lyxor, and they are all in a narrow cost range of 0.6% to 0.85%.

Emerging markets

The lowest cost ETF in this area is the db x-trackers MSCI Pacific ex Japan TRN (LSE: XPXD) at 0.45%, followed closely by the Lyxor ETF Eastern Europe (LSE: LEEU) at 0.5%. Other ETFs cost up to 0.95%, with the iShares range pitched at 0.74%.

The only unit trust trackers in this sector are the Legal & General Pacific Index Trust (0.83%) and the HSBC Pacific Index Fund (0.98%).

Obviously these categories are very broad groupings, and the main question should be what exactly do you want to buy -- it makes little sense to buy a different country because it's 0.1% cheaper, for example.

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More: The Cheapest Index Trackers