One of the greatest challenges in international investing is selecting the right index—one that is investable, transparent, and broadly representative of the market or markets an investor is targeting. Understanding what's in an index as well as the criteria for index inclusion is essential for appropriate index selection.

As the marketplace for international and global equities has expanded, so have the index offerings of many benchmark providers. Investors can now choose from a very broad to a very narrow set of indexes tracking a diverse range of regions, individual countries, global sectors and investment themes. There are even international indexes that track real estate, bonds and a range of market capitalizations. iShares ETFs' benchmark index providers—such as MSCI Inc., Standard & Poor's, and FTSE—are widely utilized by investors worldwide.

Global and Global Sector Indexes

Global indexes are designed for investors looking to access both foreign and domestic equity exposure in a single investment. One way to obtain exposure to these markets is the MSCI All Country World Index ("ACWI"). ACWI accounts for approximately 85% of the world's market capitalization and combines both developed and emerging markets into a single index.

Global sector indexes allow investors to use traditional sectors (industrials, financials, utilities, etc.) as building blocks for creating globally diversified portfolios. Investors can also use sector overlays to express strategic or tactical views and/or to neutralize the impact of being over or under-weighted toward a particular country or region.

Broad Based, Regional, and Country Indexes

Many Canada-based investors choose to obtain broad international exposure through diversified indexes of developed or emerging market countries (such as the MSCI EAFE Index, MSCI Latin America 40 Index or MSCI Emerging Markets Index). Both of these indexes are market capitalization weighted and offer exposures to over 20 different countries.

When investors want to hone in on specific geographic markets, regional and single country ETFs offer targeted exposures for both tactical and strategic portfolio uses. Accessing single countries or regions does have implications for a portfolio’s overall sector weightings but the transparency of iShares ETFs can help investors know exactly what they own because holdings are published daily on iShares.ca.