Are you considering an international ETF for your portfolio? Indeed, 2021 turned out to be one of the best years on record for ETFs. In this period, exchange-traded funds inflows exceeded $1.22 Trillion. However, 2023 is shaping up to be a different year as the stock market started to experience challenges due to geopolitical issues in Ukraine, inflation, and recession risk. As the stock markets plunged, investors faced volatility not seen since the financial crisis. Even blue chip stocks got affected, albeit for a short time.
When I started investing, it was in the early 2000s. I didn’t know the difference between Mutual Funds or an index-fund. But, I do recall buying stocks like Netscape and Yahoo, and watching them skyrocket, only to fall shortly after. Indeed, it was not unlike the meme stock craze we see today. Actually, for me, it was a good lesson in diversification.
There isn’t one thing that defines what makes the best international ETF. Some investors look for yield while others look for growth. Some speculate, and others take a buy and hold approach. Also, not all ETFs are alike. For example, some are passively managed, while others are actively managed. And some are even leveraged ETFs! In the end, picking investments is about the investor’s goals and risk tolerance level.
This article will go over the best International ETFs investors can consider in January 2023, adding simple yet reliable diversification to their portfolio.
What Are ETFs?
Today, DIY investors looking to invest their money experience a dizzying array of options. Indeed, investors can buy individual stocks, options, futures, or even CFDs. But the best way to get portfolio diversification is through an index or International ETF.
In general, ETF’s are funds that get passively managed and hold a collection or a basket of stocks. Actively managed ETFs are rare and have a higher fee. Either way, you can buy ETFs from your adviser or in your brokerage account.
Index ETFs are generally known as “Low-Cost Index Funds.” The most common index funds in the United States are from Vanguard, Fidelity, and Schwab. These Index ETFs typically track an index such as the S&P 500, the Dow Jones Industrial, or the Nasdaq. Further, index funds usually hold stocks of each company on the index. So, instead of buying 500 individual companies on the S&P 500, investors could buy an ETF such as VOO.
International ETFs, however, track and replicate the performance of various indexes in a given region, country, or continent. For example, investors seeking Chinese diversification might buy an ETF that tracks the Shanghai exchange.
Related read: How to Invest in the S&P 500
What are the Best International ETFs?
The ETF landscape is large and continues to grow every day. By the end of 2021, there were 8,552 globally traded ETFs.
Picking the best stocks is hard. And, it’s caused many active fund managers to underperform the benchmarks. Further, picking international stocks amplifies the complexity as the political landscape, micro, and macroeconomic situations can vary significantly between regions, countries, and even continents.
The best international ETF’s attempt to solve stock-picking underperformance by giving the investor diversification.
Let’s get started and discover some of the best international ETF’s:
10. Vanguard FTSE Europe ETF (VGK)
Europe is a continent with many well-performing companies from diverse industries across the region. There, investors will find technology, banking, defense, and consumer products companies, among others.
Investors looking for the best way to gain exposure to these European companies can consider investing in the Vanguard FTSE Europe ETF. Indeed, this passively managed ETF seeks to track the FTSE Developed Europe All Cap Index’s performance.
Related read: How To Invest In Dividend Stocks For Income
What Makes VGK an Excellent ETF?
An advantage of VGK is that it invests in 1363 stocks in major European markets, including Germany, France, Austria, Netherlands, Italy, United Kingdom, Switzerland, Ireland, and others.
As of 04/30/2022, VGK’s has >$23.4 billion in assets, and its top holdings include Nestle SA, Roche Holding AG, ASML Holding AG, and AstraZeneca plc.
VGK 1-year total return (As of 4/30/2022) is -10.6% and 4.38% a year over the past five years. Also, it has a best-in-class 0.08% expense ratio.
9. SPDR Portfolio Europe ETF (SPEU)
The SPEU is another European ETF worth considering for investors looking to diversify their investments. SPEU provides investors with region-specific exposure who want to focus on the European equities.
SPEU invests in 1,777 Western European companies in Germany, Switzerland, Sweden, Netherlands, France, the United Kingdom, and more.
The fund boasts 207M of assets under management, and its top holdings include Nestle SA, Roche Holding Ltd., ASML Holding NV, and Novartis AG. Further, frugal traders will appreciate the management fees are a low 0.09%.
Since the inception, SPEU ETF in 2002 has continued to provide returns to the investors in line with the benchmark. Its one-year return (as of 04/30/2022) is -7.89%, and its five-year return is 5.39% a year. This international ETF also has a current dividend yield of 3.07%, which is highly competitive.
8. Global X FTSE Nordic Region ETF (GXF)
Nordic countries in Europe include Sweden, Finland, Denmark, Iceland, and Norway. In these regions, they have become a hotbed for technology and innovation. Investors who look to this international ETF gain exposure to 68 companies like Novo Nordisk, Ericsson, Volvo, and DSV Panalpina.
As of 03/31/2022, GSF smashes the competition with a 1-year gain of 12.88% and a 5-year gain of 9.83%. Further, GFX has over $118 Million in net assets, an expense ratio of 0.5%, and a dividend yield of 0.31%.
7. Vanguard FTSE Pacific ETF (VPL)
VPL attempts to simulate the performance of the FTSE Developed Asia Pacific All Cap Index. Investors who buy this passively managed international ETF gain exposure to a well-diversified portfolio of 2,496 stocks in Japan, Hong Kong, Singapore, Australia, and New Zealand.
As of 04/30/2022, the most significant holdings included Samsung Electronics Co. Ltd., Toyota Motor Corp, and BHP Group Ltd. Further, the entire fund boasts an impressive $7.9 Billion in assets and a 0.08% expense ratio.
The returns, however, are similar to the broad market. For example, VPL appears oversold, the 1-year return is -13.71%, and the 5-year return is 4.14% annually.
Investors seeking a targeted subset of Asia Pacific stocks need only look at the iShares MSCI Pacific ex-Japan ETF. EPP offers investors exposure to 121 companies in Australia, New Zealand, Hong Kong, and Singapore. Notably, this international ETF does not include Japanese stocks.
EPP’s assets under management exceed $2.4 billion, and its most significant holdings include AIA Group LTD., Commonwealth Bank of Australia, BHP Group Ltd., and CSL Ltd. Further, its expense ratio is 0.47%.
As of 04/30/2022, EPP boasts an impressive 1-year total return of 2.43% and a 5-year total return of 5.5% a year. While these returns might not seem impressive, consider that as of 06/04/2022 the S&P 500 index has a YTD return of -14.34%.
5. Schwab Emerging Markets Equity ETF (SCHE)
For investors aiming to get exposure to international ETFs, SCHE could be their best choice. It has advantages and great returns that make it attractive to most investors.
Emerging markets are often volatile and risky – which makes them lucrative for investment. For this passively managed ETF, it has over $8.7 billion under management. SCHE invests in emerging market countries such as China, Taiwan, India, and Brazil.
Also, this Schwab ETF holds 1,874 total stocks. Some of these components included in the ETF are real estate, energy, healthcare, and utilities. The top stock holdings include Taiwan Semiconductor Manufacturing, Tencent Holdings, Alibaba Group Holding, and Reliance Industries.
SCHE has an expense ratio of 0.11%, and those who invest in this type of fund receive their dividend every six months in June and December. Moreover, as of 04/30/2022, this ETF has a -16.16% 1-year return and a 4.23% annual return over the past five years. Emerging markets are volatile, so this ETF is suitable for investors who have a healthy risk appetite.
Lastly, this is a great fund and can be a good one to provide an investor with global exposure and diversification to offset the United States-based investments.
Related read: 10 Ridiculously Easy Ways to Invest 100k
The iShares MSCI China ETF is probably the best Chinese international ETF as it has over $6.6 Billion in assets. Indeed, it offers exposure to 619 mid-cap and large-cap Chinese companies such as Tencent, Alibaba, Meituan, and China Construction Bank Corp.
Indeed, China has some of the largest companies in the world outside of the United States. And, more and more investors are paying attention to Chinese companies.
The returns, however, reflect a difficult situation in China, even with an expense ratio is 0.59%. As of 04/30/2022, MCHI boasts a 1-year growth of -34.64% and a 5-year annual growth rate of 2.54%.
3. Vanguard Total World Stock ETF (VT)
Investors who buy VT gain access to stocks from all over the world. VT offers investors high growth opportunities, but also risk. Indeed, the share price may swing higher, or lower, than an S&P 500 Index ETF. Its top holdings include Alphabet Inc., Microsoft Corp., Apple Inc.
VT is suitable for an investor seeking worldwide diversification and long-term growth from a single fund. The expense ratio is a modest 0.08%.
As of 04/30/2022, the fund holds 9530 individual stocks and its 1-year return is -7.26%, and its five-year return is 9.07% per year. Further, its net assets exceed $32.8 Billion.
Related read: How To Invest In Dividend Stocks For Income
In my opinion, the iShares Core MSCI Total International Stock ETF is, by far, the best international ETF if you’re looking for broad diversification. But, is it right for you? Let’s find out.
Investors looking for an ideal way to tap into the foreign market can use a broad-based approach that combines emerging and developed markets. The IXUS does that. For example, it invests in companies like Taiwan Semiconductor Ltd., Tencent, Alibaba, and Samsung.
The IXUS delivers exposure to 4,352 stocks with a low annual fee of just 0.07%. Having a low standard deviation makes IXUS reliable for conservative investors interested in carving international exposure to their portfolios.
As of 04/30/2022, IXUS has 1-year return of -2.31%. And, it’s 5-year annual return has done well at 10.13%. Further, it has net assets exceeding $29.5 Billion.
While Canada isn’t always considered international, the iShares MSCI Canada ETF wins the year’s Best International ETF. As of 03/31/2022 its 1-year total return is a whopping 20.31% that even Warren Buffet might applaud. EWC’s 5-year return is also impressive at 10.83%. Indeed, EWC offers investors an excellent opportunity to gain exposure to the largest Canadian companies.
The iShares MSCI Canada ETF invests in large-cap Canadian companies such as Royal Bank of Canada, Shopify, Toronto Dominion Bank, and Bank of Nova Scotia. And, the results are impressive.
The expense ratio is 0.50%, and assets are $4.69 Billion.
Related read: Can You Retire at 62 With 300k
FAQ (Frequently Asked Questions)
International ETFs offer easy diversification by reducing the risk of picking individual stocks.
Warren Buffet often recommends low cost S&P 500 index funds such as SPY, or VOO.
Both Vanguard and Fidelity will offer similar returns for similar products. However, traders might find their different services to
The best ETFs are liquid (i.e. highly traded), correlate well to their index, and offer low expense ratios.
International ETFs offer exposure to many different countries. As a result, if holdings in one country perform better, the differences can be dramatic.
In 2021, the best international ETF was iShares MSCI Canada ETF (EWC) with a 1-year total return of 20.31%
The Bottom Line on the Best International ETF
International ETFs offer investors international diversification without the hassle of stock picking.
ETFs are generally less risky than holding individual stocks. However, the tradeoff is that they may underperform the “latest hot-stock of the day.”