Are you considering an international ETF for your portfolio? Indeed, 2022 turned out to be one of the more challenging years on record for ETFs. In 2022, the S&P500 dropped -19.64% (-18.32% if you include dividends). As the stock markets plunged, investors faced volatility not seen since the financial crisis. However, the remainder of 2024 is shaping up to be a different year as the stock market is starting to see improvements in inflation and recession risk.
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 review the best International ETFs investors can consider in December 2024, adding simple yet reliable diversification to their portfolio. They are arranged in order of 1-year performance based on the market price of the ETF.
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 an index or International ETF is the best way to get portfolio diversification.
In general, ETFs are funds that get passively managed and hold a collection or a basket of securities. 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 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, investors could buy an ETF such as VOO instead of buying 500 individual companies on the S&P 500.
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.
What are the Best International ETFs?
The ETF landscape is large and continues to grow every day. By the end of 2022, there were 8,754 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, and micro and macroeconomic situations can vary significantly between regions, continents, and even countries.
The best international ETFs attempt to solve stock-picking underperformance by offering investor diversification.
Let’s get started and discover some of the best international ETFs:
10. iShares MSCI Canada ETF (EWC)
While Canada isn’t always considered international, the iShares MSCI Canada ETF is that should be on any investors radar. As of 03/31/2023 its 1-year total return is a -13.11%. EWC’s 5-year return is also impressive at 6.73%. Indeed, EWC offers investors an excellent opportunity to gain exposure to the largest Canadian companies. Interestingly, in 2022, ETW was the best international ETF on our list. This year, it ranks 10th.
The iShares MSCI Canada ETF invests in large-cap Canadian companies such as Royal Bank of Canada, Enbridge, Toronto Dominion Bank, and Bank of Nova Scotia. And, the results are impressive.
The expense ratio is 0.50%, and assets are $3.4 Billion.
9. 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 potentially incredible 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 $8.6 billion under management. SCHE invests in emerging market countries such as China, Taiwan, India, and Brazil.
Also, this Schwab ETF has 1,843 holdings. 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 03/31/2023, this ETF has a -9.2% 1-year return and a -0.4% 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 indeal for investor looking for global exposure and diversification to offset the United States-based investments.
8. iShares MSCI Pacific ex-Japan ETF (EPP)
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 132 companies in Australia, New Zealand, Hong Kong, and Singapore. Notably, this international ETF does not include Japanese stocks.
EPP’s assets under management exceed $2.1 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 03/31/2023, EPP boasts a 1-year total return of -7.21% and a 5-year total return of 3.01% a year. While these returns might not seem impressive, the fund performed marginally better than the index.
7. Vanguard Total World Stock ETF (VT)
Investors who buy Vanguard Total World Stock ETF 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 0.07%.
VT dropped from #3 in 2022 to #7 in 2023 due to its 1year performance. As of 02/28/2023, the fund holds 9518 individual stocks, and as of 03/31/2023, its 1-year return is -7.03%, and its five-year return is 6.89% per year based on its market price. Further, its net assets exceed $34.7 Billion.
6. Vanguard FTSE Pacific ETF (VPL)
Vanguard FTSE Pacific ETF 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 02/28/2023, the fund has 2476 holdings and the most significant holdings included Samsung Electronics Co. Ltd., Toyota Motor Corp, and BHP Group Ltd. Further, the entire fund boasts an impressive $8.7 Billion in assets and a 0.08% expense ratio.
The returns, however, are similar to the broad market. For example, the 1-year return is -5.67%, – beating the benchmark’s -7.04% return.
5. iShares Core MSCI Total International Stock ETF (IXUS)
In my opinion, the iShares Core MSCI Total International Stock ETF is, by far, one of the best international ETFs 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 4,320 holdings 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 03/31/2023, IXUS has 1-year return of -4.71%. And, it’s 5-year annual return has done well at 2.38% (comparatively). Further, it has net assets exceeding $31 Billion.
4. iShares MSCI China ETF (MCHI)
The iShares MSCI China ETF is probably the best Chinese international ETF as it has over $8.6 Billion in assets. Indeed, it offers exposure to 628 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 geopolitical situation in China, even with an expense ratio is 0.58%. As of 03/31/2023, MCHI boasts a 1-year return of -3.71% and a 5-year annual growth rate of -4.81% based on the market price.
3. iShares Core MSCI EAFE ETF (IEFA)
The iShares Core MSCI EAFE ETF seeks to track the investment results of an index composed of large-, mid- and small-capitalization developed market equities, excluding the U.S. and Canada.
The fund invests in 3016 holdings with over 95 billion in assets. Top holidings include Nestle SA and LVMH Moet Hennessy Louis Vuitton SE. Not only that, the expense ratio is only 0.07% – that’s just $7 in fees for every $10,000 invested!
As of March 31, 2023, the funds 1-yr return was -1.26% based on it’s market price.
2. SPDR Portfolio Europe ETF (SPEU)
The Stoxx Europe 50 SPDR 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 1,816 Western European companies in Germany, Switzerland, Sweden, Netherlands, France, the United Kingdom, and more.
The fund boasts 391.89M of assets under management, and its top holdings include Nestle SA, Roche Holding Ltd., LVMH Moet Hennessy Louis Vuitton SE, 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 02/28/2023) is -1.09%, and its five-year return is 4.51% – based on market price. This international ETF also has a current dividend yield of 2.79%, which is highly competitive for international ETFs.
1. 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.
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.
What Makes VGK The Best International ETF in 2023?
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 03/31/2023, the 1 year return was 1.26%, and cumulatively, its 5-year return is 4.21% based on the market price. Also, it has a best-in-class 0.11% expense ratio – which is excellent compared with it’s peers that are around 1%.
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.
The Bottom Line on the Best International ETF
International ETFs offer investors international diversification without the hassle of stock picking. Now, under normal circumstances, a 1.26% return isn’t something that would land an ETF on a top 10 list, let alone the top spot. But given the performance of the S&P 500 in 2022 (-19.64%), I think 1.26% isn’t bad!
ETFs are generally less risky than holding individual stocks. However, the tradeoff is that they may underperform the “latest hot-stock of the day.”
