Two stock exchanges come to mind when Asians consider exchange‐traded funds (ETFs): Singapore and Hong Kong. In April 2016, Alexander Chipman Koty reported for ASEAN Briefing that Hong Kong's stock market trades an average of US$18.42 billion per day. In contrast, Singapore's stock market's average trading volume was $796 million per day.¹

What does this mean for you?

Think of two airport currency exchange booths side by side. In some Asian airports, they hustle you a bit for business. Which booth do you pick? Assume neither attendant has mossy teeth or knock‐me‐over breath. So you look at the currency rates and spreads on the electronic board behind them.

One of the booths has a wider spread between each currency's listed buy and sell prices. You want a decent deal when selling a currency and a decent deal when buying. So you select the booth with the narrower spreads. When investing, most Asians would select the Hong Kong over the Singapore exchange for the same reason. Hong Kong's market offers narrower bid/ask spreads on its stocks and ETFs because daily business volume is higher than it is in Singapore.

Some Asians bypass both exchanges, purchasing ETFs and individual shares off US exchanges. But doing so adds risk: Their heirs may have to pay American estate taxes if their US‐domiciled holdings exceed $60,000.² It doesn't matter whether or not such products are purchased from a non‐US brokerage.

Asians can choose to buy ETFs off the UK, Canadian, or Australian exchanges without such risks. But they can also build a diversified portfolio of ETFs from the Hong Kong exchange. I've listed portfolio samples in Table 18.1.

None of the ETFs in these model portfolios are synthetic or swap based. Synthetic ETFs are popular on the Hong Kong exchange. But physical ETFs carry lower risks.

A synthetic ETF doesn't actually contain stocks within it. Instead, another institution promises to provide the ETF investor with the total return of the stock market that it tracks. It's like a promissory note backed by a financial institution. Because it doesn't hold physical shares, there's an extra layer of risk.

Table 18.1 lists model portfolios listing physical ETFs only. Each of them trades on the Hong Kong exchange. They're also all priced in Hong Kong dollars.

The iShares Core MSCI AC Asia Index (3010.HK) contains 554 Asian stocks. The index includes shares in a descending order of weighting from China, South Korea, Taiwan, India, Hong Kong, Singapore, and Malaysia.

Vanguard's S&P 500 Index contains 501 US stocks. Vanguard's FTSE Developed Europe Index contains 540 stocks from 15 European countries.

The ABF Pan Asia Bond Index includes investment‐grade bonds from a variety of Asian countries including China, Singapore, Malaysia, Hong Kong, Thailand, the Philippines, and Indonesia.

Asian investors wanting further international bond market diversification might choose to buy iShares Global Inflation Linked Gov't Bond ETF (IGIL). It trades on the London Stock Exchange. It's priced in US dollars, but it represents a breadth of global bonds and currencies.

In Table 18.1, you might notice that I've emphasized the Asian stock market index less than the US and European indexes. As I mentioned throughout the book, it's always best to go lighter on stocks from developing economies. They might perform well. But they're also a lot less stable.

Some Asians might prefer a portfolio without a bias toward Asian stocks. This makes a lot of sense for investors who won't retire in Asia. If they're planning to retire in one of the other regions listed in this book (Chapters 11–17), they can build portfolios that represent their respective retirement region.

However, if they're unsure where they'll eventually retire, they might prefer a Global Nomad's portfolio. See Table 18.2 for examples. Such portfolios don't provide a home‐region bias. Instead, they're allocated based on global market capitalization. That means they're diversified across all global markets. They are weighted most heavily toward US stocks because American stocks make up slightly more than half of the world's stock market's total value. The Global Nomad's portfolio also includes exposure to Europe, Asia, and emerging‐market economies.

Notice that the ETFs are listed in US dollars. This doesn't mean it's an investment in US dollars. It's diversified across a variety of global currencies. The listed currency means little. Please see Chapter 10 for a further explanation.

Asian investors who want a socially responsible portfolio (see Chapter 10) could replace the iShares Core MSCI World ETF with the iShares Dow Jones Global Sustainability Screened ETF (IGSG). As with the other ETFs in Table 18.2, it trades on the UK exchange.

Speculators Suffer

Beating most investment professionals is easy. Simply build one of the above portfolios. On a risk‐adjusted basis, you will beat most professional investors after fees. In other words, if your portfolio is conservative, you will outperform most professionally managed conservative portfolios. If your portfolio is aggressive, you'll outperform most professionally managed aggressive portfolios. Add money every month or every quarter. Ignore stock market forecasts. Ignore your gut. Ignore investment news on the television or the Internet.

Most people (especially men) have a tough time doing that. They try to second‐guess the market. Many people ask, “Should I wait for stocks to fall before I invest?” Others will try to dance in and out of different index funds based on their (or somebody else's) prediction of the future.

This, unfortunately, is the wrong way to think. It's the Neanderthal brain pulling at the human heart. If you can sidestep speculation, that's great. Pick one of the model portfolios above and stick to the process, year after year.

If, on the other hand, you have a gambler's genes (most people do), don't invest your own money. Choose one of the investment firms that I listed in Chapter 8. It could be one of the best financial decisions that you'll ever make.