Best International Stock ETFs to Buy Now

Everything you need to know about investing in international stocks, plus the best international stock ETFs to buy now.

Aug 18, 2023 - 06:30

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Best International Stock ETFs to Buy Now

Investing in international stock exchange-traded funds (ETFs) has become increasingly popular among investors seeking diversification in their portfolio. International stock ETFs provide exposure to foreign markets and allow investors to tap into new opportunities that may not be available in domestic markets. In this article, we will explore the industry of international stock ETFs, the advantages and risks associated with investing in them, and some alternatives for investors who may not be interested in this industry.

Understanding International Stock ETFs

An international stock ETF is a type of exchange-traded fund that invests in companies located outside of the investor's home country. These ETFs can provide exposure to a variety of countries and regions, including developed and emerging markets. Some examples of international stock ETFs include the iShares MSCI EAFE ETF, which tracks companies in Europe, Asia, and Australia, and the Vanguard FTSE Emerging Markets ETF, which invests in companies located in developing countries.

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Best International Stock ETFs as of 7/31/23

TheStreet Ratings model ranks the risk-adjusted returns on all ETFs on a monthly basis. These 10 international stock ETFs are currently ranked highest by TheStreet Ratings' methodology.

Fund Name, Ticker, Overall Rating, (Risk Grade)

WisdomTree Japan Hedged Equity DXJ A+ (B-)
Xtrackers MSCI Jp Hdg Eq DBJP A+ (B-)
WisdomTree Japan Hedged SmallCap Eq DXJS A+ (B-)
iShares MSCI India Small Cap SMIN A+ (C+)
First Trust India NIFTY 50 Eq Wght NFTY A+ (C+)
iShares MSCI Mexico EWW A+ (C+)
Franklin FTSE Mexico FLMX A+ (C+)
WisdomTree India Earnings Fund EPI A (C+)
Global X MSCI Greece ETF GREK A (C)
Franklin FTSE Japan Hedged FLJH A- (C)

TheStreet Ratings' model ranks the risk-adjusted returns on all ETFs on a monthly basis.

Advantages of Investing in International Stock ETFs

One of the primary advantages of international stock ETFs is the diversification they offer. By investing in companies across different regions and industries, investors can spread their risk and reduce the impact of any single company or market on their portfolio. Additionally, international ETFs may provide opportunities for higher returns than domestic stocks, as some countries may experience higher economic growth rates or have undervalued companies.

International stock ETFs can also provide access to markets and industries that may be difficult for individual investors to access. For example, some emerging market countries may have restrictions on foreign investments, making it challenging for individuals to invest in these markets. However, international stock ETFs can provide exposure to these markets and give access to new investment opportunities. In addition, international stock ETFs can provide currency diversification benefits. When investors buy international stocks, they are also exposed to fluctuations in foreign currencies. However, international stock ETFs can invest in currencies from a range of countries, reducing the impact of currency fluctuations on the overall portfolio.

Risks of Investing in International Stock ETFs

Investing in international stock ETFs can be risky due to the potential for political instability, economic instability, and currency fluctuations. Political instability in a foreign market can affect the performance of the international stock ETF, as it can result in changes to government policies, regulations, or economic conditions that can negatively impact the performance of the fund.

Economic instability is also a risk associated with investing in international stock ETFs. Economic instability can result from factors such as inflation, high unemployment rates, and slow economic growth. These factors can negatively impact the performance of companies within the international stock ETF and, as a result, negatively impact the performance of the fund as a whole.

Currency fluctuations are another risk associated with investing in international stock ETFs. When investing in an international stock ETF, investors are exposed to currency risk as the value of their investment can be affected by changes in foreign exchange rates.

Alternatives to Investing in International Stock ETFs

Investors may consider other types of ETFs that align with their investment goals and risk tolerance. Global ETFs provide exposure to international markets outside of a specific region or country, which can offer diversification benefits. Emerging market ETFs can provide exposure to countries with rapidly growing economies and the potential for higher returns, but also come with higher risk. Growth and income ETFs may be an option for investors seeking a combination of capital appreciation and regular income, typically through exposure to large-cap companies with stable earnings and dividends.

The Bottom Line

International stock ETFs offer investors exposure to companies located outside of their home country and provide diversification benefits by investing in different markets, sectors, and industries. However, investing in international stock ETFs can be risky due to potential political instability, economic instability, and currency fluctuations. Investors should carefully consider the risks and benefits of investing in international stock ETFs before making any investment decisions.

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