A choppy stock market in 2018.
It is increasingly clear that international factors are having a big impact on the stock market. Consider the volatility in March, prompted by uncertainty about Trump administration trade policies and retaliatory tariffs from China. Or at a company level, there’s a record $2.7 billion fine against tech giant Alphabet (ticker: GOOG, GOOGL) last year, levied by European Union regulators. In this interconnected world, investors can’t afford to take their eyes off overseas markets and rely wholly on U.S. stocks and economic policies. So if you want to insulate your portfolio from this globally influenced volatility — or even tap into overseas profits — here are seven exchange-traded funds for consideration.
Vanguard Total International Stock ETF (VXUS)
The easiest place to start for a cheap and diversified international investment is the VXUS. As the ticker symbol implies, it’s Vanguard’s “ex-U.S.” index fund that provides exposure to major investment markets outside America. And as is typical for a Vanguard fund, it has a rock-bottom fee structure with just 0.11 percent in annual expenses, or $11 each year on every $10,000 invested. To be clear, this is a developed-world fund. A little over 40 percent is in Europe with another 20 percent in Japan. These are multinational names you would recognize, including energy giant Royal Dutch Shell (RDS.A) and electronics giant Samsung.
SPDR Portfolio Emerging Markets ETF (SPEM)
On the flip side is this SPDR fund that is wholly focused on emerging markets. The top region is China, with more than 40 percent of the assets there or in nearby Taiwan, but India, Brazil and South Africa are all well-represented as a share of holdings. And though financials and information technology together make up a little more than half of assets, the sector breakdown is also pretty diversified across all manner of industries. Top holdings in the SPEM include Asian internet giant Alibaba Group Holding (BABA) and South African telecom Naspers.
WisdomTree China ex-State Owned Enterprises Fund (CXSE)
Some investors don’t care about the broad world of emerging markets and simply want to invest in the big dog — namely, China. That’s where CXSE comes in. This fund is unique from all the other China funds because it has an express prohibition on state-run corporations. Instead, it is comprised of private enterprises like tech powerhouse Baidu (BIDU). There is no guarantee that any stock is completely free of the influence of Beijing, of course. But if you want to invest in China without getting in deep with the government, this is a good way to do so.
First Trust Developed Markets ex-US Small Cap AlphaDEX Fund (FDTS)
If you want to split the difference between the stability of developed markets and the growth potential of smaller companies in fast-growing regions, the FDTS fund is a good choice. This ETF purchases small caps instead of the entrenched multinationals on other lists. The median market capitalization of its 400 holdings is about $1.3 billion. These names are not well known, including French mining company Eramet and South Korea’s Ssangyong Cement. But for investors looking to access small international stocks via an ETF, the FDTS has a lot to offer.
iShares EDGE MSCI Multifactor Intl ETF (INTF)
A more tactical approach to international investing, this multi-factor fund from iShares is not benchmarked to a plain vanilla index of simply the largest picks in a given region. Instead, this $600 million ETF applies a specific screening system to find the best international stocks. According to its prospectus, INTF looks for “four proven drivers of return: financially healthy firms, stocks that are inexpensive, smaller companies and trending stocks.” A few examples of those selections include Japanese industrial giant Hitachi and French financial giant Axa.
FlexShares International Quality Dividend Index Fund (IQDF)
The small ETF shop of FlexShares offers a number of smart-beta funds like IQDF, which aim to offer a subtle twist on typical index funds. In the case of this ETF, the focus is on international stocks with dividends that are reliable and yields that are above average for their peer group. Right now, the fund boasts a dividend yield of about 4 percent based on the last 12 months of payouts. Holdings include large-cap favorites like British pharmaceutical stock GlaxoSmithKline (GSK), as well as lesser-known corporations like Japanese robotics company Fanuc.
WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
This fund taps into the big growth of emerging markets and small-cap stocks, but tries to mitigate risk by going after higher-quality stocks that pay a dividend. This makes quite an interesting list, with companies including South African clothing retailer Truworths International and Czech bank Moneta Money Bank. But the fund is very well diversified, with none of its 780 holdings weighted at more than 1.5 percent or so. The 3 percent yield is better than the Standard & Poor’s 500 index roughly 2 percent yield right now, too, so the fund does all this while still delivering a nice dividend payout.
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7 International ETFs to Insulate Your Portfolio originally appeared on usnews.com
