Researching individual stocks in other countries can be challenging. Many don’t even trade on US exchanges. The easiest way to get exposure and diversification is through the more than 1,300 exchange-traded funds (ETFs) that have total assets of $1.6 trillion and that specialize in foreign stocks. Neena Mishra, CFA, from Zacks Investment Research, suggests her favorite ETFs for overseas stocks…
Best total international ETF: Vanguard Total International Stock ETF (VXUS) offers one-stop global shopping with a portfolio of nearly 8,000 stocks from about 50 foreign countries. The fund has been slightly riskier than the US stock market because it allocates about 20% of its portfolio to more volatile emerging-market stocks. It offers a recent yield of 2.94% versus just 1.54% for the S&P 500. Annual expense ratio: 0.07%. Performance: 5%.*
Best developed-market ETF: iShares Core MSCI Intl Dev Mkts ETF (IDEV) is a low-cost option for more conservative investors who want to avoid or limit exposure to emerging markets. Its portfolio of about 2,275 stocks covers about 30 nations with more mature economies. Thirty-five percent of assets are invested in Japanese and British companies. Annual expense ratio: 0.04%. Five-year performance: 4.71%.
Best emerging-market ETFs…
iShares Core MSCI Emerging Markets ETF (IEMG) invests in about 2,700 stocks, with a focus on four Asian countries—China, India, South Korea and Taiwan. Annual expense ratio: 0.09%. Performance: 3.51%.
Invesco S&P Emerging Markets Low Vol ETF (EELV). For investors who want exposure with less angst, this fund has been one-third less risky than traditional emerging-market indexes. Its 200 holdings are big, stable companies that have historically low swings in their share prices. The fund’s 3.24% recent yield also tempers volatility. Annual expense ratio: 0.29%. Performance: 2.3%.
Best single-country ETFs…
India: WisdomTree India Earnings ETF (EPI). Indian stocks can be volatile, but EPI screens for high-quality, profitable businesses and weights investments by those with the strongest earnings over the past 12 months. The 400-plus stock portfolio has a heavy allocation to basic materials and energy firms. Annual expense ratio: 0.84%. Performance: 10.56%.
Japan: Franklin FTSE Japan ETF (FLJP). If you want to bet on a Japanese economic rebound after decades of struggles, this fund’s 515 stock holdings focus on blue-chip industrials. Annual expense ratio: 0.09%. Five-year performance: 3.48%.
Mexico: iShares MSCI Mexico ETF (EWW) offers exposure to 44 of the country’s largest consumer and industrial companies. The fund has risen more than 25% this year thanks to a strengthening Mexican peso and more US companies relocating operations out of China and closer to home. Annual expense ratio: 0.50%. Performance: 2.02%.
