Top-Foreign-ETFs

Top Global ETFs for diversifying your investment portfolio across international markets

 

As global markets continue to integrate, investing in foreign markets has become an essential strategy for diversifying portfolios, reducing risk exposure, and tapping into growth opportunities worldwide. With international equities accounting for approximately 60% of the global stock market capitalization (Source: MSCI), investors can no longer afford to overlook the potential of foreign markets.

In 2020, foreign equities-focused Exchange-Traded Funds (ETFs) saw a record $154 billion in net inflows, highlighting the growing demand for diversified international exposure (Source: ETFGI). Foreign Equities-focused ETFs offer a convenient and efficient way to invest in foreign markets without the complexities of direct overseas investments. Here are some of the top foreign exchange-traded funds to consider for diversifying your portfolio globally.

 

Understanding International ETFs

 

International ETFs offer a diversified portfolio by tracking indices that comprise stocks from various countries, regions, or sectors. These funds can focus on developed markets, such as the EAFE (Europe, Australasia, and Far East) region, emerging markets, like the BRICS (Brazil, Russia, India, China, and South Africa) nations, or blend both.

By investing in international ETFs, investors can diversify their portfolio and reduce exposure to domestic market volatility, while gaining access to sectors and companies that may be underrepresented in their home markets, such as emerging market consumer staples or European technology firms. This, in turn, allows investors to tap into growth opportunities in regions with rapidly expanding economies or innovative industries.

 

Top Foreign ETFs for Global Diversification

 

The following are some of the most notable foreign ETFs that help investors achieve global diversification:

 

1. Vanguard Total International Stock ETF (VXUS)

 

The Vanguard Total International Stock ETF is one of the largest global ex-U.S. equity ETFs, with approximately $72.1 billion in assets under management as of mid-2024. This fund tracks the performance of the FTSE Global All Cap ex-US Index, which holds equities in developed and emerging markets.

 

Key Features:

 

  • Holdings: Approximately 8,587 different equities.
  • Top Regions: Europe (40.88%), Pacific (26.21%), Emerging Markets (25.39%).
  • Top Countries: Japan, U.K., China, Canada, France.
  • Expense Ratio: 0.08%.
  • Distribution Yield: 3.24%.

VXUS is perfect for investors who need extensive exposure worldwide without the holding of U.S. stocks being diluted.

 

2. Vanguard FTSE All-World ex-US ETF (VEU)

 

One of the best alternatives is Vanguard FTSE All-World ex-US ETF (VEU), which boasts $39.1 billion AUM. This ETF holds large- and mid-cap stocks in developed and emerging markets, excluding the United States.

 

Key Features:

 

  • Holding: Around 3,842 distinct equities.
  • Top Regions: Europe 41.63%, Pacific 26.52%, Emerging Markets 25.20%.
  • Top Countries: Japan, U.K., China, France, Canada.
  • Expense Ratio: 0.07%.
  • Distribution Yield: 3.30%.

VEU is a good choice for investors who want an internationally diversified portfolio with the exposure of having larger companies at the top.

 

3. iShares Core MSCI Total International Stock ETF (IXUS

 

around $36.7 billion as of June 2024. It tracks international Stock ETF equity markets broadly but eliminates U.S.-domiciled companies.

 

Key Features:

 

  • Held: Around 4,440 individual equities.
  • Top Regions: Essentially equivalent to VXUS and VEU.
  • Top Countries: Japan, UK, Canada, China, France.
  • Expense Ratio: 0.07%.
  • Distribution Yield: 2.95%

IXUS is right for the long-term investor looking to cheaply gain exposure to all international markets.

 

More Important International ETFs

 

There are some other worthy international ETFs to look at, and the above are among the biggest and most popular options for broad global diversification.

 

  • Mirae Asset NYSE FANG+ ETF: focuses on high-growth stocks in technology from names such as Facebook and Amazon.
  • Motilal Oswal Nasdaq 100 ETF: Provides exposure to the Nasdaq-100 Index, which includes major tech firms.
  • SPDR MSCI ACWI UCITS ETF: Tracks the MSCI All Country World Index, offering broad exposure to both developed and emerging markets.

 

Benefits of Investing in Foreign ETFs

 

Investing in foreign ETFs provides several advantages:

 

Diversification: Reduces risk by spreading investments across various geographies and sectors.

Access to Fast-Growing Economies: Present opportunities in fast-growing economies that would not be available on domestic investment.

Currency Exposure: Investments often benefit from favorable currency flows against the investor's currency.

 

Conclusion

 

Choosing the right foreign ETFs can greatly enhance your investment portfolio by providing global diversification and access to international growth opportunities. Among the options, there are three top picks for investors looking to expand their horizons beyond domestic markets: the Vanguard Total International Stock ETF (VXUS), Vanguard FTSE All-World ex-US ETF (VEU), and iShares Core MSCI Total International Stock ETF (IXUS).

Before investing, take stock of your financial goals and risk tolerance and your investment time horizon to identify the perfect ETFs to incorporate your portfolio strategy. Leverage these top foreign ETFs to navigate the global world and take advantage of diversity in investment opportunities worldwide.