Look overseas for opportunities in stocks.
International stocks have been disappointing recently. With trade wars, Brexit struggles, rising interest rates and immigration issues, world investment market returns have faltered. But that’s no reason to avoid them. “While it is often difficult for investors to hold an asset that is dragging down overall portfolio value, it’s important to remember that at some point these underperforming assets, which are trading at low valuations, will offer buy opportunities,” says Kate Stalter, president of Better Money Decisions in Santa Fe, New Mexico. Here are seven ways to invest in international stocks and diversify your portfolio.
Vanguard FTSE All-World ex-US ETF (ticker: VEU)
For the broadest international coverage, a one-and-done fund like the Vanguard FTSE All-World index fund covers the globe. The fund, with a low 0.11 percent expense ratio ($11 annually per $10,000 invested), is a cheap way to own a piece of the world economies. The fund tracks the performance of the FTSE all-World ex-US Index that measures both developing and developed market companies across the globe. The 3.1 percent yield is better than most money market mutual funds, and VEU’s price-earnings ratio of 12.3 is more attractive than the 18.5 P/E of the S&P 500.
Xtrackers MSCI EAFE Hedged Equity ETF (DBEF)
Kevin O’Brien, president at Boston-based Peak Financial Services, recommends DBEF, a Europe, Australia and Far East fund. This diversified developed market stock fund captures a large swath of the developed international market. “This is a U.S. dollar, currency-hedged index exchange-traded fund with a 0.35 percent expense ratio and trailing 12-month yield of 2.24 percent,” he says. “It has beaten 98 percent of its peer group over the past five years and 90 percent over the past three years. Because of the currency hedge, it has attained this lofty status with a third of the risk, giving it a beta of 0.67 compared to its benchmark, the MSCI EAFE Value NR USD Index.”
Vanguard FTSE Emerging Markets ETF (VWO)
The VWO is the largest emerging markets fund, owning thousands of large-, mid-, and small-cap foreign stocks located in emerging markets around the world. An emerging market economy lacks high levels of market efficiency and financial regulations and is on the path to becoming more advanced. Despite a loss of 12 percent in 2018, the 2.6 percent yield somewhat cushions the pain. VWO tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index of approximately 4,032 common stocks. With a low 0.14 percent expense ratio, this diversified emerging markets fund gives investors a chance to participate in the faster growth of these nascent economies.
XTrackers Harvest CSI 300 China A ETF (ASHR)
Invest internationally in countries that have fallen the greatest percentage from their 2018 highs, says Steven Jon Kaplan, CEO at True Contrarian Investments in New York. Kaplan favors ASHR, a large-cap fund that tracks the CSI 300 Index, a free-float weighted index consisting of 300 A-share stocks listed on the Shanghai or Shenzhen Stock Exchanges. ASHR is trading 38 percent below its 52-week high and dropped about 25 percent in 2018.
VanEck Vectors India Small-Cap ETF (SCIF)
“Small stocks lost more overall than large-cap counterparts in 2018 so they will generally rebound more in 2019,” Kaplan says. For international exposure he likes SCIF, which lost 38 percent last year. SCIF seeks to copy the performance of MVIS India Small-Cap Index that is comprised of small-cap stocks from Indian companies. Riskier than more diversified, foreign stock funds, this narrowly focused fund might appeal to speculative investors willing to take on greater risk for a chance at super-sized returns.
Fidelity Emerging Asia Fund (FSEAX)
For investors pursuing regional exposure, U.S. News ranks FSEAX as the No. 1 Pacific/Asia ex-Japan ETF at this writing. The fund lost 13.1 percent last year and offers a 0.94 percent yield. For investors who believe that the current trade conflict with China will soon be resolved, this fund offers access to well-known Asian firms such as Tencent Holdings (TCEHY), Taiwan Semiconductor Manufacturing Co. (TSM) and Alibaba Group Holding (BABA). The fund strives for capital appreciation and buys stocks that are fundamentally sound.
Look at nation-specific countries.
Beaten-down sector funds give investors a chance to focus on specific economies. Kaplan recommends the iShares MSCI South Africa ETF (EZA), Global X MSCI Colombia ETF (GXG), Global X MSCI Argentina ETF (ARGT), iShares MSCI Poland ETF (EPOL) and Global X MSCI Pakistan ETF (PAK). Each of the country-specific international stock funds had a losing year. Kaplan expects the strong U.S. dollar, versus low international currencies to help international exports to the U.S. This potential scenario would increase international sales, lower profit margins and ultimately boost international stock prices. Experts understand that U.S. investments in a domestic-only portfolio misses important capital growth opportunities.
Disclosure: The author owns shares of VEU and VWO.
The best international stock funds to buy.
These are the best international stock funds to buy in 2019:
Vanguard FTSE All-World ex-US ETF (VEU)
Xtrackers MSCI EAFE Hedged Equity ETF (DBEF)
Vanguard FTSE Emerging Markets ETF (VWO)
XTrackers Harvest CSI 300 China A ETF (ASHR)
VanEck Vectors India Small-Cap ETF (SCIF)
Fidelity Emerging Asia Fund (FSEAX)
More from U.S. News
7 Expert Investing Moves to Make in 2019
16 Investing Questions That Intimidate You, But Shouldn’t
7 Stock Picks From Top-Rated Wall Street Analysts
Best International Stock Funds to Buy in 2019 originally appeared on usnews.com
