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Updated Jan. 15, 2011 12:01 a.m. ET

Our northern neighbor exports oil, gas, grains, agricultural minerals and industrial and precious metals—just about everything fast-growing countries in Asia and South America need to build infrastructure. Export Development Canada, a government agency that provides credit to Canadian exporters, forecasts 57% growth in Canadian exports to Asian-Pacific countries and lesser-but-strong growth to other emerging markets in 2011.

Enjoy your stay! Canada’s stock market, its currency and its banks have all provided much happier returns than their U.S. counterparts in recent years. Tim Foley for Barron’s

One thing to know about Canadian ETFs is that they can be tightly focused on certain industries. iShares MSCI Canada (up 17.74% in 2010), in particular, is concentrated in the economy’s leading sectors, with 31% of assets in financials, 27% in energy and 23% in materials.

The latter two sectors should enjoy continued demand as the world economy recovers, says Morningstar analyst Michael Rawson. The Federal Reserve’s plan to pump $600 billion of debt into the reserve currency should make more money available to support commodity and energy prices. Canadian banks didn’t overextend subprime real-estate loans and don’t face the deleveraging that bankers in many developed countries do. Canadian home prices haven’t tumbled like those in the U.S. and Canadian banks consistently rank among the world’s soundest. Not one Canadian bank has gone under, cut dividends or needed a bailout, notes Pape. Those three facts speak for themselves.

Meanwhile, IQ Canada Small Cap, up 33.73% last year, offers a more diversified mix of small- and midcap holdings focused on materials and energy. It’s weighted 55% to industrial materials, 18% to energy and only 7% to financials. It has about the same number of holdings as iShares MSCI Canada, but aims to have only a dozen represent more than 1% of assets each. With very little overlap in their top holdings, IQ Canada complements iShares MSCI Canada.

The Bottom Line

Buy Canadian ETFs on weakness or use dollar cost-averaging, because the stocks have run up of late. Still, nearly 3% GDP growth is expected.

IF CANADA HAS A PROBLEM THESE DAYS, it’s that it lives next door to the U.S. which buys 75% of its exports. A devalued American dollar makes those exports less competitive, and any weakness in U.S. or world-wide per-capita spending is quickly reflected in Canadian commodity sales. The investment story in Canada is different from the story in fellow resource-rich Commonwealth member Australia, which has tied itself more closely to China and India.

Considering 2010’s gains, short-term traders may want to wait to buy Canadian ETFs on dips. But investors can cost-average their dollars in Canadian positions and rely on a longer investing horizon to smooth out some of the volatility characteristic of commodity markets.

Ultimately, it’s a bet on an economy showing fundamental secular strength as far as the eye can see.

O Canada!

A handful of new and existing ETFs give American investors a nice balance of market caps and industries.