Seeking exposure to foreign markets can be an important diversification tactic. One such market is Canada which given its proximity and close ties to the US makes it an investment that is easy to understand. However, this also means that you may end up getting less of a diversification benefit from it.

There are at least three ways to invest in the Canadian equities market using exchange traded funds (ETFs). The first is using Barclays iShares offering, EWC, which attempts to match the performance of the MCSI Canada Index. This is certainly a quick way to tap in to the broad Canadian market. What's worth noting is that this ETF is heavily weighted in large financial and energy companies. It's up to you to decide if this is where your portfolio needs to be.

Another method is to use Barclay's iShares offerings that trade on the Toronto Stock Exchange. These are truly Canadian-based offerings that offer a little more flexibility from the EWC ETF mentioned above. These Canadian-based ETFs include XIU which is the Canadian version of the S&P 500. There is also a mid-cap offering, XMD, along with several sector-based offerings such as REITs, tech, gold, and energy. See the iShares Canada site for the complete list.

Another company, Claymore Investments which is a Canadian subsidiary of the Claymore Group out of Chicago is working on bring fundamental indexes to Canada. Their plans include the launch of 6 new ETFs in the following areas:

• Global Fundamental Indexation
• US Fundamental Indexation
• Japan Fundamental Indexation
• Oil Sands
• BRIC (Brazil Russia India China)
• Dividend & Income

You'll want to note that these offerings take the fundamental approach to weighting the underlying assets. An idea that I haven't entirely bought in to.

For my portfolio, I've chosen the XIU ETF traded on the TSE. This choice was made largely because of an account I held in Canada that I felt would be easier to invest than the transfer to a US account and then invest. And because of the energy and materials boom that we've had in the last three years, this ETF has actually been one of my top performing picks. It also serves as a component of exposure to international markets.