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EAFE Index - No Purchase Necessary
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EAFE Index
The Europe, Australasia and Far East Index is a very old multi-national index (it has been calculated since 1969). It is designed to reflect the performance of 'foreign' stocks from the point of view of an American investor. The nice thing about it is that by combining it with a US only index such as the S&P500 or the Russell Index you can get a measure of the performance of global stock markets.

Even better, since a future on this index is traded, it is possible to get some proxy for the performance of the global equities from positions in only two futures. My own preference is for the S&P500 index, which can be traded in 'mini' form at about $50 a point, so that the margin required can be kept modest.

The EFE index is traded, in principle, around the clock, as is the mini S&P500. However putting in a market order outside regular trading hours in CBOT (CME?) would be a big mistake. It is tricky to trade because there isn't a whole load of liquidity, so stops are difficult to use. Of course this opens up the opportunity for someone with more time on his hands than I have to make some money by providing some liquidity to the market by actively trading this future.

Of course a more liquid exposure to global stock markets could be achieved by taking positions in the major European and Far Eastern indices. Probably it would be sufficient to take a position in something like the STOXX 50, and then the Nikkei and Hang Seng. This would use up a lot more capital though, and would miss out Australasia entirely (adding the ASI to the mix would not be too difficult, I suppose).

I'm very sorry if this is means nothing to you. It is certainly not any kind of investment advice: only you can take a view about going short or long.

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