If you want to get exposure to Brazil in a diversified manner, Brazil-focused ETFs are the easiest way. If you have an account through which you can trade ETFs from the New York Stock Exchange (NYSE), you can invest in Brazil right away.
Here I will list six ETFs for you to get started. If you prefer investing on individual stocks, you may want to check these Brazilian Companies.
iShares MSCI Brazil ETF (EWZ)
This 15-year old ETF, introduced in July 14, 2000 has gathered more assets than any other non-US, single-country ETF. It currently has over $6 billion under management. iShares Brazil tries to replicate the MSCI Brazil index and as such, it is highly exposed to the Brazilian Large Caps: Petrobras, Vale, Ambev, Itau Unibanco and Bradesco.
Over the past 10 years, EWZ has risen almost 300%, while the S&P 500 is pretty much breaking even.
While these blue-chips do provide good scale and less volatility than it’s smaller counterparts, this ETF is highly exposed to commodities producers: Petrobras, Vale, OGX Petroleo, CSN and Gerdau. That obviously brings volatility. On the other hand, iShares Brazil gives long term investors a good inflation hedge as it will benefit from commodities prices spike. In a world where emerging markets keep growing, albeit slower, commodities prices tend to go up as basic needs such as food and energy are the first ones purchased by the emerging middle-class.
When you buy this fund, you are basically long the world’s low-middle-class.The one that buys its food, can afford its house, basic appliances and perhaps a car. They will not spend on fancy, expensive gadgets or on the dream holiday.
Well, if you are long that low-middle-class you should know they are growing fast. Countries like China, India and Brazil are growing between 5% and 10% and the ones getting the most advantage of this growth are the “new middle-class”. Recent growth deceleration in these countries present a good buying opportunity for the patient investor.
Global X Brazil Mid Cap ETF (BRAZ)
This fund is more recent and started trading June 2010. The investment seeks to provide investment results that correspond generally to the price and yield performance of the Selective Brazil Mid Cap index.
While the large caps in Brazil are highly tight to the world’s economy, these mid-cap companies are more targeted to the internal market.
Market Vectors Brazil Small-Cap ETF (BRF)
If you want to get even further exposed to Brazilian internal market, this fund is for you. The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Brazil Small-Cap Index
This fund is older and has more assets than the mid-cap focused BRAZ. With $1.2 billion under management BRF’s liquidity is still not so high though. On top of that, some of its investments don’t have that much liquidity either.
If you want to get exposure to the domestic economy though, nothing is better than BRF.
EGS INDXX Brazil Infrastructure ETF (BRXX)
The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield performance of the INDXX Brazil Infrastructure index.
With the Olympics fast approaching, infrastructure investment will be priority in the next 12 months. But here again, BRXX’s low liquidity is a concern as well.
ProShares Ultra MSCI Brazil (UBR)
If you want to go all-in on Brazil, UBR is the ETF for you. The investment seeks daily investment results that correspond to twice (200%) the daily performance of the MSCI Brazil Index.
To achieve that, UBR uses leverage, which obviously increases its risk so be careful before investing in this one. It does provide a nice beta for your buck, though.
ProShares UltraShort MSCI Brazil (BZQ)
During some periods of time, you may feel you have too much exposure to Brazil or you just want to bet on a drop. BZQ seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the MSCI Brazil Index.
Again, use leveraged ETFs with care. If you believe in a continued meltdown of emerging markets, this ETF is a good candidate for you since its double downside exposure to the commodities-heavy MSCI Brazil gives you a good beta.