The decade-long dominance of U.S. equities over their foreign counterparts has faltered significantly in the opening quarter of 2025. As of March 14, the S&P 500 is down 4.1% year to date, while the tech-heavy Nasdaq composite has slid more than 8.1%.
In contrast, European equities have been a bright spot, with the EURO STOXX 50 index — a benchmark tracking the 50 largest blue-chip stocks across eurozone economies — rising 11% over the same period.
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“The first months of 2025 have shown increased investor focus on international investing, with developed markets strongly outperforming their U.S. counterparts,” says Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group.
This outperformance has been driven by a rotation into international stocks, largely attributed to the Trump administration’s increasingly isolationist policies. A combination of reduced support for Ukraine and tariffs on key trading partners like Canada has prompted a reassessment of U.S. market stability, which for years had been a cornerstone of investor confidence.
Beyond policy concerns, valuations have also played a role. For years, U.S. stocks have traded at significantly higher forward price-to-earnings (P/E) ratios compared to international markets. Now, as those multiples compress, investors are reconsidering their exposure.
“One of the main attractions of European equities has been their near-record valuation discount to U.S. equities,” Noack explains. “In particular, European financials and defense sector stocks have led the market higher, mostly driven by earnings upgrades.”
Those with a heavy home-country bias — a tendency for investors to overweight domestic stocks due to familiarity and perceived stability — have felt the strongest headwinds recently. The easiest way to mitigate this risk is by diversifying internationally.
While investors can buy individual foreign stocks through American depositary receipts (ADRs), a simpler and broader approach is to own exchange-traded funds (ETFs) or mutual funds that provide exposure to international equities.
“Adding international stocks to your portfolio can dampen volatility and improve returns, since the U.S. economy and market may face challenges at different times compared to international regions,” says Scott Klimo, chief investment officer at Saturna Capital. “Mitigating currency risk also plays a role, as the U.S. dollar may strengthen or weaken versus other countries at different times.”
Here are seven of the best international stock funds to buy in 2025:
| Fund | Expense ratio |
| Vanguard Total International Stock Index Fund Admiral Shares (ticker: VTIAX) | 0.09% |
| Fidelity ZERO International Index Fund (FZILX) | 0% |
| SPDR EURO STOXX 50 ETF (FEZ) | 0.29% |
| iShares MSCI Switzerland ETF (EWL) | 0.50% |
| iShares MSCI United Kingdom ETF (EWU) | 0.50% |
| Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) | 0.35% |
| Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) | 0.09% |
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
“The ex-U.S. market makes up about 40% to 45% of the world’s market capitalization, so by ignoring international stocks, investors are missing out on roughly half the world’s investing opportunities,” says Kirk Kinder, founder and president of Picket Fence Financial. “Moreover, international stocks are substantially undervalued when you look at metrics like price-to-earnings and price-to-book ratios.”
Investors can get low-cost exposure to more than 8,500 international equities via VTIAX, which tracks the FTSE Global All Cap ex US Index. This fund currently allocates approximately 26% to emerging-market equities and the remainder to developed-market equities. Vanguard also recently made VTIAX more affordable by lowering its expense ratio to 0.09%. However, it does require a $3,000 minimum investment.
Fidelity ZERO International Index Fund (FZILX)
The cheapest way to invest internationally is via FZILX, which has a true 0% expense ratio. In addition, the fund has no minimum required investment amount, zero sales loads, and it trades commission-free on Fidelity’s brokerage platform. FZILX tracks the Fidelity Global ex U.S. Index, which spans more than 2,200 market-cap-weighted international equities across both developed and emerging markets.
FZILX is able to eliminate fees thanks to two features. First, the fund uses an internally developed, proprietary benchmark which cuts out licensing costs. Second, the fund is able to lend securities, which generates income to further offset operational costs. As a passive index-tracking fund, FZILX also has a low 5% turnover rate, which reduces both size and frequency of taxable capital gains distributions.
SPDR EURO STOXX 50 ETF (FEZ)
Investors looking for exposure to the largest, most liquid European equities can use FEZ for exposure. This ETF tracks the aforementioned EURO STOXX 50 Index, which represents around 60% of the total free-float market capitalization of the broader EURO STOXX Total Market Index. Essentially, this index is Europe’s counterpart to the S&P 500 in the U.S. or the S&P/TSX 60 in Canada.
FEZ’s top holdings include companies like ASML Holdings NV (ASML), SAP SE (SAP), LVMH Moet Hennessy – Louis Vuitton Société Européenne (OTC: MC.PA) and Allianz SE (OTC: ALV.DE). It is overweight financial and industrial sector stocks and is concentrated in French and German equities. FEZ is popular as a trading tool thanks to a low 0.02% 30-day median bid-ask spread. However, it charges a higher 0.29% expense ratio.
[Read: 5 Best S&P 500 Index Funds to Buy Now]
iShares MSCI Switzerland ETF (EWL)
EWL may be an interesting option for investors looking to diversify internationally while mitigating the risk of a future European conflict. This is because Switzerland’s long-standing neutrality has helped its economy remain stable during periods of geopolitical turmoil. In addition, the nation is home to notable consumer staples, health care and financial giants that play an important role in the global economy.
EWL tracks the MSCI Switzerland 25/50 Index. The ETF’s portfolio of 49 companies includes prominent names like Nestle SA (OTC: NESN.SW), Roche Holding AG (OTC: ROG.SW), Novartis AG (OTC: NOVN.SW), and UBS Group AG (UBS). EWL is also a fairly defensive holding, with lower sensitivity than the market thanks to a three-year equity beta of 0.8. However, it does come at a higher 0.5% expense ratio.
iShares MSCI United Kingdom ETF (EWU)
While no longer considered part of the European Union post-Brexit, the UK stock market remains home to some of the largest and most recognized companies worldwide. Examples include energy giants Shell PLC (SHEL) and BP PLC (BP), consumer goods conglomerate Unilever PLC (UL), globally systemically important bank HSBC Holdings PLC (HSBC) and diversified manufacturer Rolls-Royce Holdings PLC (OTC: RR.L).
Investors can gain exposure to these aforementioned companies and 70 more via EWU, which tracks the MSCI United Kingdom Index. The ETF is well-capitalized with more than $3.2 billion in assets under management (AUM) and has a track record dating back to March 1996. EWU also pays an above-average dividend, with a 3.1% 30-day SEC yield. However, it does charge a higher 0.5% expense ratio.
Xtrackers MSCI EAFE Hedged Equity ETF (DBEF)
“It is important to understand that international investments have two sources of risk and return: the movements of the equity prices of the foreign companies and the movements in the value of the foreign currency, like the Japanese yen, the euro or the British pound sterling,” Noack explains. Given the strength of the U.S. dollar, some international funds like DBEF hedge their currency exposure.
This ETF tracks the MSCI EAFE US Dollar Hedged Index, with EAFE standing for Europe, Australasia and the Far East. Thanks to use of currency hedging, DBEF and its benchmark have outperformed the unhedged MSCI EAFE Index strongly over the trailing 10-, five- and three-year periods, a period that saw the U.S. dollar strengthen. The ETF charges a 0.35% expense ratio and pays a 2.6% 30-day SEC yield.
Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF)
“Similar to DBEF, HDEF also represents a broadly diversified basket of international equities, with two key differences,” Noack says. “The ETF leaves its currency exposure unhedged and focuses on high-quality companies with a yield 1.3x that of the MSCI EAFE Index, along with screens for dividend sustainability and persistence.” HDEF currently pays a higher-than-average 4% 30-day SEC yield.
The benchmark for HDEF is the MSCI EAFE High Dividend Yield Index. This ETF may be particularly suitable for income investors who want to diversify away from a U.S.-heavy dividend stock allocation. Over the last three years, HDEF has actually outperformed the MSCI EAFE Index significantly, returning an annualized 6% versus 1.7%. The ETF is also very affordable with a low 0.09% expense ratio.
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7 Best International Stock Funds to Buy for 2025 originally appeared on usnews.com
Update 03/17/25: This story was published at an earlier date and has been updated with new information.
