Economic growth is often better in those countries with the greatest economic freedom. The Heritage Foundation measures economic freedom in countries throughout the world, based on such criteria as trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, regulation, and information market activity.
Several of the countries ranking highest in this survey are available to investors via easy, convenient country-specific iShares, which are exchange traded funds (ETFs). The expense ratio for these ETFs is 0.84 percent, vs 1.2 percent to 1.4 percent for most foreign stock funds.
Through iShares, ETFs are available for these economically “freest countries”: Australia, Singapore, Canada, Austria, Hong Kong, Netherlands, United Kingdom, Switzerland, Sweden, and Germany. From 2002 through 2004, the iShares of these ten countries outperformed iShares MSCI EAFE (a worldwide index fund) by an average of 5.43 percent each year, and that outperformance has continued in 2005. Boosting foreign stock returns by emphasizing countries with economic freedom also can provide excellent diversification.
