See if you can guess the country ...

• Straddles two different oceans

• Part of the British Commonwealth

• Huge wilderness area

• English-speaking

• Democracy

• Capitalist

• Technologically and industrially advanced

• Huge natural resource reserves

Did you think about Canada? If so, you'd be correct. But another country also fits the description: Australia. However, here in the U.S. we aren't as familiar with Australia. Few of us have been there, and it's a long way from home.

Investors need to check out what is happening down under because Australia has some amazing investment opportunities. You can take advantage of them with exchange traded funds (ETFs), too. Let's take a closer look.

Australia: Better than Canada?

I love Canada and all things Canadian. I've made some good money over the years by investing with our neighbor to the north. But right now, being neighbors with the U.S. isn't so attractive.

The border won't protect Canada from our recession.

You see, the border can't protect Canada from all our economic problems. Parts of the Canadian economy are shrugging off the U.S. recession. Inevitably, though, weakness here means weakness there.

The Aussies also have deep ties to the U.S. and the industrialized West, but there are important differences. The same oceans that make it seem so remote also insulate Australia from the trouble we're going through — and put it that much closer to fast-growing China and Southeast Asia.

Think about it this way: Australia is to China as Canada is to the U.S. So if you believe (as I do) that China is going to overtake the U.S. as the world's largest economy in the coming decades, Australia is likely to do far better than Canada.

Vast Area, Vast Potential

Australia certainly has plenty of room to grow — and I mean that literally. People forget how big it really is!

Here's a good comparison: The continental U.S. has a land area of about 3.1 million square miles. Australia's land area? Just a bit smaller at 2.9 million square miles.

Now compare population: The U.S. has about 300 million people. Australia, with almost as much land mass, has a population of only 22 million — and most of them are concentrated in a few big cities near the coast. The interior "Outback" is vast, largely unpopulated, and filled with all kinds of mineral riches.

Australia's outback is vast, unsettled and rich.

The Asians certainly see potential in Australia. For instance just this week, Singapore Exchange Ltd. made an $8.3 billion offer for ASX, Australia's primary stock exchange. The potential combination could create a regional trading powerhouse.

So how can you get involved in Australia? You can certainly look at individual stocks, but I prefer the convenience and diversification of ETFs. American investors can consider two ETFs devoted to Australian stocks:

• iShares MSCI Australia (EWA) holds 74 of the largest, most liquid stocks domiciled in Australia. Mining giant BHP Billiton (BHP) is the largest holding, but the biggest sector in this ETF is actually financial services. When expressed in U.S. dollars, EWA has posted a total return of 140.6 percent since the March 2009 market low.
  
  
• IQ Australia Small Cap (KROO) is a newer choice and has a different focus. KROO tracks an index of small-cap Australian stocks, with a heavy emphasis on materials, consumer discretionary and industrial issues.

There is little or no overlap between EWA and KROO, so you could benefit from holding both. Just be aware that they'll still be highly correlated to each other.

You might also want to check out two other ETFs that are closely related to Australian stocks:

• CurrencyShares Australian Dollar (FXA) follows the exchange rate between the U.S. dollar and the Australian dollar. The greenback has been losing ground to the Aussie buck for quite some time, a trend that has picked up momentum in the last few weeks. FXA is a good way for Americans to hedge their currency exposure.
  
  
• iShares MSCI New Zealand (ENZL) is a new ETF, just launched in September of this year. New Zealand, as you know, is an island nation near Australia with close economic ties. Whenever Australia prospers, you can expect ENZL to share in some of the good fortune.

As always, be cautious when trading international ETFs. Due to time zone differences, they are subject to large opening gaps — both up and down — when morning reaches the U.S.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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