Investments

How Much International Stock Should I Have

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 14 minute read

When given the choice, most investors will want to put their money into a company that is based in their own country. After all, conventional wisdom says it’s best to stick to the stocks of firms whose products and services you already use, and you probably haven’t spent much time studying overseas markets.

You may come across information regarding overseas stocks that piques your curiosity as you accumulate money and investigate new prospects. These equities are traded on international stock exchanges and are not generally well-known in the United States.

The fluctuation of international markets makes it difficult to pick the finest possibilities on a stock-by-stock basis without first doing considerable homework. However, exchange-traded funds, or ETFs, allow you to acquire access to the worldwide market with far less legwork. In addition, the large degree of diversity offered by foreign funds reduces the impact that the failure of even a couple of the stocks in the fund would have on your portfolio as a whole.

Buy the Best International ETFs

One of the most common ways to put money to work on Wall Street today is through exchange-traded funds. As a result, there is no shortage of foreign investment options.
In which direction do you go first? Currently available top-tier foreign ETFs consist of:

  1. Vanguard FTSE Developed Markets ETF (VEA)

A discussion of the best exchange-traded funds (ETFs) almost always includes Vanguard. Since its inception in 1975, the fund management organization has consistently provided investors with exceptional returns at far lower costs than the competition.

The goal of the fund is to offer investors with access to a diverse set of small- to large-cap foreign equities from developed areas. The greatest single allocation of the fund’s assets is to the Pacific area, followed by Europe. Canada accounts for the great bulk of the fund’s North American holdings (less than 9%).

Key Figures

The ETF’s cost ratio is below average, and it has a strong track record, much like other Vanguard funds. Key statistics are as follows:

  • Weighing the Options: Allocating Resources. The fund invests in a diverse group of foreign equities. The portfolio’s top five positions are held by Nestle (NESN), Samsung Electronics (005930.KS), ASML Holding (ASML), Roche Holdings (ROG), and Toyota Motor Corporation (TM).
  • Ratio of Expenses to Income. The fund has a minimal annual expense ratio of 0.05%. If you compare the expense ratio of this fund to the average expense ratio of ETFs (0.44%, per Experian), you’ll see that it allows you to keep a far larger portion of your profits.
  • Amazing, once-in-a-lifetime Results. You may say that the fund’s performance has been nothing short of spectacular. An annualized return of 36.44 percent has been realized by investors during the past year. During the last year, the category as a whole returned an average of 8.19 percent, as reported by Yahoo! Finance. The returns over the last three years have averaged 9.27%, while the returns over the past five years have averaged 10.90%.
  • Payment Per Share of Dividends. The fund’s dividend yield is 2.43%, so it’s a good choice for individuals who want to supplement their income with the stock market or who want to grow their wealth by reinvesting their dividends.
  • Money-Back Score from Morningstar. The ETF is one of the best rated foreign funds available today, with a 4-star rating from Morningstar.
  • Values-Based Investment Score by MSCI. Environmental, social, and governance (ESG) risk resilience are measured by Morgan Stanley Capital International (MSCI) and used to provide ratings to various funds. According to ETF.com, this fund has an ESG grade of AA based on its MSCI ESG score of 7.57 out of 10, making it a promising option for impact investors.
  1. Vanguard Total International Stock ETF (VXUS)

You should also consider the Vanguard Total International Stock ETF. The goal of the fund was to provide investors a chance to profit from both developing and established economies through a single investment vehicle.

Those who put money into the fund will be able to benefit from fluctuations in the value of currencies in both established economies like Canada and the United Kingdom and growing markets like China and Brazil.

To measure its performance, the fund compares itself to the FTSE Worldwide All Cap ex-US Index, which follows more than 5,000 firms across global markets and all market capitalizations except for those in the United States.

Key Figures

Investors may anticipate the same low fees and high returns from the VXUS that they have come to expect from Vanguard funds.

  • Weighing the Options: Allocating Resources. The fund’s investment portfolio is made up of a wide variety of small- and large-cap foreign equities. Five of the portfolio’s largest positions are held in Taiwan Semiconductor Manufacturing (TSM), Tencent Holdings (TCEHY), Alibaba Group Holding (BABA), Nestle (NESN), and Samsung Electronics (005930.KS).
  • Ratio of Expenses to Income. The ETF has a very low cost ratio, at only 0.08% annually.
  • Amazing, once-in-a-lifetime Results. The fund’s returns over the past year have averaged 37.19%, which is much higher than the category average of 11.15%.
  • Three-year returns came in at 9.64%, while five-year returns came in at 11.15 %, both much above the average for foreign funds.
  • Payment Per Share of Dividends. The fund’s dividend yield of 2.40% makes it a desirable choice for income investors and those who plan to reinvest their payouts to increase their returns.
  • Money-Back Score from Morningstar. Morningstar has given the fund a grade of 3.0 out of 5.
  • Values-Based Investment Score by MSCI. The fund has a 6.78 out of a possible 10 on the ESG scale, earning it an A grade and indicating that it makes an effect through its investments that is somewhat greater than average.
  1. iShares Core MSCI Total International Stock ETF (IXUS)

When compiling a list of the finest funds in any area, including foreign stock ETFs, iShares is a corporation that is difficult to leave off. iShares, which began trading in 2000, has rapidly expanded to become one of the industry’s most prestigious fund managers.

With the goal of providing global diversification without exposure to U.S. equities, the iShares Core MSCI Total International Stock ETF was created. The fund’s portfolio, like those of the others on this list, consists of small, medium, and large-cap stocks.

Key Figures

Aside from Vanguard, iShares is another well-respected fund manager, and this particular fund lives up to its reputation for generating excellent returns at remarkably low costs. Key data include:

  • Weighing the Options: Allocating Resources. The fund gives investors access to a wide range of international markets, both developing and developed, excluding the United States. Taiwan Semiconductor Manufacturing (TSM), Tencent Holdings (TCEHY), Alibaba Group Holding (BABA), Nestle (NESN), and Samsung Electronics make up the top five holdings in the portfolio (005930.KS).
  • Ratio of Expenses to Income. This fund’s annual expense ratio is 0.09%, significantly lower than the average for its category.
  • Amazing, once-in-a-lifetime Results. This fund has done quite well. The ETF had annualized returns of 37.45% during the last calendar year. The returns over the last three years were 9.60% and over the past five years they were 11.21%.
  • Payment Per Share of Dividends. The fund’s dividend yield of about 2.11% isn’t the highest on this list, but it’s still respectable.
  • Money-Back Score from Morningstar. The fund is one of the best in its category, earning a 4 out of 5 star rating.
  • Values-Based Investment Score by MSCI. The ETF receives an A grade thanks to its ESG score of 6.73 out of 10. Because of this, the fund may be a good choice for people who want their money to make a difference.
  1. Vanguard FTSE Emerging Markets ETF (VWO)

So far, all of the funds included here have invested primarily in developed markets or a hybrid of established and emerging markets. However, the Vanguard FTSE Emerging Markets ETF may be the best option if you’re searching for diverse exposure to emerging markets worldwide.

The VWO ETF, like any investment in a developing market, carries a higher level of risk but also a larger growth potential. The fund invests in developing economies such as China, Brazil, Taiwan, and South Africa in an effort to replicate the performance of the FTSE Emerging Markets All Cap China A Inclusion Index.

The fund’s portfolio also features a wide variety of equities from both small and major companies.

Key Figures

Investors have taken notice of the VWO ETF due to its extremely cheap entry price and proven track record of providing superior returns. Key statistics are as follows:

  • Weighing the Options: Allocating Resources. The fund’s primary investing emphasis is companies from emerging markets with different market capitalizations. The top five holdings in the ETF are as follows: Tencent Holdings (TCEHY), Alibaba Group Holding (BABA), Taiwan Semiconductor Manufacturing (TSM), Meituan (MPNGF), and Reliance Industries Ltd. (RELIANCE).
  • Ratio of Expenses to Income. Investing in the fund will only cost you 0.10 percent each year, which is much less than the typical fund’s expense ratio.
  • Amazing, once-in-a-lifetime Results. The fund’s performance has been fantastic, as one would expect from a growth-oriented ETF that invests in emerging economies.
  • Investors in the fund have had returns of 40.22% over the past year, 11.75% over the past three years, and 11.93% over the past five years.
  • Payment Per Share of Dividends. The product has a decent dividend yield of 2.05%.
  • Money-Back Score from Morningstar. An average of 3.0 stars was awarded to the ETF.
  • Values-Based Investment Score by MSCI. Fund receives a 4.65 out of a possible 10 on the ESG scale, earning it a BBB rating. The fund’s social and environmental effect is just slightly below average. Therefore, impact investors may wish to search elsewhere.
  1. Invesco China Technology ETF (CQQQ)

Invesco is a second example of a reputable Wall Street investment management firm. Although the company’s funds often have higher cost ratios, they are also well-known for outperforming the market on average.

This also applies to the Invesco China Technology ETF. The goal of this product is to replicate the performance of an index composed of big and medium-sized Chinese technology businesses (the FTSE China Incl A 25% Technology Capped Index). As a matter of fact, at least 80% of the portfolio is invested in the equities that make up the index.

Key Figures

While the fund’s expenses leave something to be desired, its impressive rate of return makes up for them. The crucial numbers are listed below.

  • Weighing the Options: Allocating Resources. The majority of the fund’s holdings are invested in technology companies based in China. The portfolio is dominated by Chinese IT companies: Tencent Holdings (TCEHY), Meituan (MPNGF), Baidu (BIDU), Sunny Optical Technology (SOTGY), and Bilibili (BIBLY) (BILI).
  • Ratio of Expenses to Income. The expense ratio for this fund is 0.70%. That’s a bit more than typical in the field, and it might end up costing you a lot when you consider how much it will eat into your compound interest over time. However, the fund still merits inclusion on a list of the best foreign ETFs because of the balance provided by its remarkable returns.
  • Amazing, once-in-a-lifetime Results. In this respect, the fund really excels. Investors have made a remarkable 33.28% in the past year, while earning 15.18% and 21.14% during the past three and five years, respectively.
  • Payment Per Share of Dividends. This is not a particularly high-yielding investment, with a dividend yield of only 0.54%.
  • Money-Back Score from Morningstar. The average rating for mutual funds is 3.0.
  • Values-Based Investment Score by MSCI. The fund’s 3.59 Environmental, Social, and Governance (ESG) score equates to a BB grade. Some potential investors may be put off by the fact that the fund’s investments don’t have a significant beneficial influence on society or the environment.
  1. Schwab Emerging Markets Equity ETF (SCHE)

Schwab has been in business for many years and has a track record of producing solid returns for clients for at least that long. That’s why it’s comforting to know that the Schwab Emerging Markets Equity ETF is taking care of your money with expert care.

The fund’s objective is to replicate the performance of the FTSE Emerging Index, which is part of the FTSE Global Equity Index Series and includes stocks representing more than 99% of the world’s investable market cap. This fund is one of the most diversified on the list since it tracks one of the most comprehensive developing market benchmarks in the world, the FTSE Emerging Index.

The fund’s holdings include equities from nations such as China, Brazil, and Taiwan. There is tremendous growth potential, but the risks are higher with developing market funds in general.

Key Figures

Schwab is another example of a reputable fund manager on our list due to its cheap fees and high returns. Key statistics are as follows:

  • Weighing the Options: Allocating Resources. This fund mostly holds big and mid-cap companies from emerging markets. Tencent Holdings (TCEHY), Alibaba Group Holding (BABA), Meituan (MPNGF), and Vale SA are the fund’s top five holdings (VALE).
  • Ratio of Expenses to Income. Compared to similar funds, the annual cost ratio of 0.11% is quite low. So, you’ll keep more of your earnings.
  • Amazing, once-in-a-lifetime Results. While the fund’s expenditures are quite low, its returns are hardly impressive. In the past year, investors in the fund have experienced gains of more than 38%, with three- and five-year returns coming in at 11.50% and 12.04%, respectively.
  • Payment Per Share of Dividends. With a dividend yield of 2.32%, the SCHE ETF is noted for delivering large dividend payouts. Income investors seeking diverse exposure to developing markets will find it to be an excellent choice.
  • Money-Back Score from Morningstar. The fund has a 3-star rating, indicating slightly above-average results.
  • Values-Based Investment Score by MSCI. The ETF received a BBB grade based on its 4.68 Environmental, Social, and Governance score. This suggests that the fund has a somewhat below-average impact on the environment and society.
  1. Global X FTSE Nordic Region ETF (GXF)

Global X, the youngest fund manager on our list, was founded in 2008. In spite of this, the firm has created quite an impact on Wall Street, since investors in its various products have seen exceptional gains.

The Global X FTSE Nordic Region Exchange Traded Fund (ETF) should give similar results.
The purpose of the fund is to give investors extensive exposure to the Nordic area by investing in companies based in Finland, Sweden, Norway, and Denmark.

The index that this product follows is the FTSE Nordic 30, which includes the 30 biggest and most liquid stocks in the four Nordic nations. As a result, your portfolio will be at risk if economic and market circumstances in the Nordic area deteriorate, as it is not as diversified as the others on this list.

Key Figures

If you’re an investor seeking market-beating returns, the GXF ETF’s stellar performance, especially over the past year, makes it a compelling option. Key statistics are as follows:

  • Weighing the Options: Allocating Resources. The fund is invested in the largest and most liquid equities in the Nordic countries. Novo Nordisk (NVO), DSV Panalpina (DSV), Investor AB B (INVE B), Nordea Bank (NRDBY), and Vestas Wind Systems make up the top five positions in the portfolio (VWS).
  • Ratio of Expenses to Income. The annual expense ratio for this fund is 0.51%. That’s a tad more than the norm, but it’s understandable given the fund’s success.
  • Amazing, once-in-a-lifetime Results. The GXF fund excels in this situation. One year returns were 44.73%, three year returns were 15.30%, and five year returns were 11.76%.
  • Payment Per Share of Dividends. The fund’s dividend yield has averaged between 2% and 3% over the long run. Recently though, the yield has plummeted to just 1.51%. Dividend investors have had good luck with this stock in the past, but the yield has been less than stellar recently.
  • Money-Back Score from Morningstar. Morningstar has not assigned a rating to this mutual fund.
  • Values-Based Investment Score by MSCI. With an ESG rating of AA and a score of 7.85 out of 10, this fund is highly recommended for socially and environmentally conscious investors.
  1. International Dividend Achievers ETF by Invesco (PID)

The Invesco International Dividend Achievers Exchange Traded Fund (ETF) is aimed at investors who wish to generate income from foreign equities. The fund’s holdings are extremely diverse, since they are composed of common stocks from issuers all over the globe in order to replicate the performance of the Nasdaq International Dividend Achievers Index.

Companies outside of the United States that have increased their yearly regular dividend payments for at least five years in a row make up the index.

The fund’s holdings include both American and worldwide depository receipts and non-U.S. stocks that have met the requirements to be considered international dividend achievers.
The dividend payments from the portfolio assets have climbed steadily over the past five years, making this fund a good choice for those who want to build a passive income stream.

Key Figures

Since the fund’s primary objective is to provide dividends, its value has increased at a slower rate than that of comparable foreign ETFs. The substantial dividends more than make up for the slower price rise. Key statistics are as follows:

  • Weighing the Options: Allocating Resources. The fund’s objective is to provide investors with exposure to foreign dividend-growing firms. The portfolio consists of publicly traded companies from all over the world, with the majority having significant market capitalizations and operating in the energy and utilities industries.
  • This portfolio’s top five holdings are as follows: Enbridge Inc (ENB), BCE Inc (BCE), Pembina Pipeline Corp (PBA), Cia Paranaense De Energia Copel (ELP), and TC Energy (TRP).
  • Ratio of Expenses to Income. The yearly yield for investors is 0.56%, which is higher than average for the market.
  • Amazing, once-in-a-lifetime Results. The average return for the past year has been 49.73%, with returns of 8.49% and 8.75% during the past three and five years.
  • In addition, the fund’s focus on dividends means that its volatility is much lower than that of other international ETFs, making it a good option for those wishing to profit from foreign markets with less risk.
  • Payment Per Share of Dividends. The fund’s dividend yield of 2.75% makes it an attractive choice for those wishing to supplement their income with their investments.
  • Money-Back Score from Morningstar. The ETF has a 3-star rating on Morningstar, which suggests returns are somewhat higher than average for a dividend-heavy fund.
  • Values-Based Investment Score by MSCI. Fund receives an A grade based on its 6.99 Environmental, Social, and Governance score. Therefore, the fund is an attractive choice for those interested in social effect.
  1. Foreign Shareholder Yield ETF from Cambria (FYLD)

Cambria is a relatively new fund manager, having been established in 2000, yet it has already made waves on Wall Street by producing massive returns for its investors.

Cambria International Shareholder Yield ETF is an exchange traded fund that aims to give exposure to foreign equities in developed markets with market values over $200 million. In addition, Cambria prioritizes firms with a high combined ranking of dividend payments and share buybacks when adding equities to the portfolio.

More than 100 equities make up the fund’s investment portfolio, providing substantial diversity and shielding shareholders from volatility risk.

Key Figures

Even though the fund’s expenditures are greater than usual, its returns and dividend payouts have been exceptional. Here are the most important numbers:

  • Weighing the Options: Allocating Resources. The fund’s objective is to give investors diverse exposure to worldwide firms with $200 million or more in market size that pay out high dividends, repurchase large amounts of shares, or do both. ARC Resources Ltd (AETUF), Tourmaline Oil Corp (TRMLF), Rio Tinto (RTNTF), Labrador Iron Ore Royalty (LIFZF), and Shanghai Fushan Resources Group are the top five positions in the portfolio (HK 0639).
  • Ratio of Expenses to Income. The fund has an annual expense ratio of 0.59%, which is higher than typical. The fund’s higher expenditures make it less attractive, but it also offers some of the industry’s highest returns and payouts.
  • Amazing, once-in-a-lifetime Results. Certainly, the fund’s results have been noteworthy. Returns on investments were 51.76% in the last year, 8.46% after three years, and 11.51% after five years.
  • Payment Per Share of Dividends. The ETF is a fantastic choice for income investors, since it offers a dividend yield of 4.34%.
  • Money-Back Score from Morningstar. The fund’s above-average performance has earned it a 4-star rating for returns.
  • Values-Based Investment Score by MSCI. The fund’s ESG score of 7.3 out of 10 is equivalent to an A grade, making it a desirable choice for those who want their money to have a positive effect on society and the environment.

Bottom Line

If you’re interested in diversifying your portfolio, exchange-traded funds (ETFs) are a fantastic option. To that end, international exchange traded funds (ETFs) provide a straightforward entry point into the realm of international investment.

Investing in ETFs requires a lot less legwork than investing in individual stocks, but it’s important to keep in mind that not all investment-grade funds are made equal. Carefully consider the fund’s track record, fees, dividend yield, and asset allocation before making a commitment. In addition, ESG rankings may help you evaluate the fund’s effect in terms of its social and environmental performance, which is important if you’re trying to make a difference with your investments.

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