No matter where investors live, they tend to have one thing in common: a strong home country bias. This refers to the tendency to allocate a disproportionate share of their portfolios to domestic stocks, often at the expense of global diversification.
Canadian investors pile into Canadian banks and energy stocks. Australians load up on miners. Brits go heavy on FTSE names. And U.S. investors often go heavy on big American tech companies.
This bias can lead to lopsided portfolios. U.S. stocks already account for about 72% of the MSCI World Index, but you’ll still see so-called finfluencers endorsing social media mantras like “100% VOO” or “VTI and chill.”
These are shorthand phrases for investing exclusively in a duo of low-cost Vanguard index exchange-traded funds (ETFs) that only hold U.S. stocks, effectively ignoring the other 28% of the global equities universe.
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That might be fine if U.S. valuations weren’t so stretched. According to financial data provider Finviz, the U.S. market currently trades at 22.4 times forward earnings, the fifth-most expensive globally.
International markets, on the other hand, look much more attractive. Developed economies like Canada, Switzerland and Australia trade at forward price-to-earnings ratios of 15.9, 14.1 and 11.1, respectively. Emerging markets come in even cheaper, with China at 14.9, Mexico at 12.5 and Argentina at just 7.8.
Thanks to the rise of ETFs and the growing popularity of lower mutual fund fees, it’s never been easier or more affordable to add international exposure. Investors can opt for broad global ex-U.S. funds, zero in on specific countries, or even drill down into individual sectors abroad.
“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 FTSE All-World ex-US Index Fund Admiral Shares (ticker: VFWAX) | 0.08% |
| Vanguard Total International Stock ETF (VXUS) | 0.05% |
| Fidelity ZERO International Index Fund (FZILX) | 0.00% |
| iShares Core MSCI EAFE ETF (IEFA) | 0.07% |
| iShares Core MSCI Emerging Markets ETF (IEMG) | 0.09% |
| Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) | 0.35% |
| Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) | 0.09% |
Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX)
“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, director of financial planning at Bastion Fiduciary. “Moreover, international stocks are substantially undervalued when you look at metrics like price-to-earnings and price-to-book ratios.”
Investors with at least $3,000 in buying power can access VFWAX, which tracks more than 3,800 international stocks via the FTSE All-World ex US Index. Emerging markets make up roughly 26% of this fund, with the rest allocated to developed markets. Vanguard also recently lowered the expense ratio for VFWAX down to just 0.08%, which implies fees of just $8 per year on every $10,000 investment.
Vanguard Total International Stock ETF (VXUS)
Investors looking to avoid the $3,000 minimum investment requirement imposed by VFWAX may find VXUS to be a suitable alternative. As an ETF, VXUS trades at a price of around $69 per share, making it highly accessible. This ETF tracks the FTSE Global All Cap ex US Index, which is similar to the benchmark used by VFWAX but is broader in scope thanks to the inclusion of small- and mid-cap stocks.
VXUS holds more than 8,500 stocks versus the 3,800 or so represented in VFWAX. However, because both funds are market-capitalization weighted, their top holdings are very similar. VXUS also features approximately the same split VFWAX has between developed- and emerging-market countries. Vanguard also recently lowered the expense ratio for VXUS down to 0.05%, making it even more affordable than VFWAX.
Fidelity ZERO International Index Fund (FZILX)
VFWAX may be affordable, but it doesn’t have the lowest expense ratio out there. That title goes to FZILX, which has a zero percent expense ratio along with no minimum required investment or transaction fees on Fidelity’s brokerage platform. The fund itself is broadly diversified with around 2,200 holdings and is also highly tax efficient thanks to a minimal 3% annual portfolio turnover rate.
FZILX’s extreme cost-cutting measures begin with the use of a proprietary index benchmark, which eliminates licensing fees. In addition, the fund uses sampling techniques in lieu of full index replication to cut down on transaction fees. Finally, FZILX can employ securities lending to further offset operational expenses. FZILX has returned an annualized 10.6% over the trailing five-year period.
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iShares Core MSCI EAFE ETF (IEFA)
For more region-specific exposure focused on developed international markets, consider the IEFA. This ETF tracks the MSCI EAFE IMI Index, where EAFE stands for Europe, Australasia and Far East, and IMI stands for Investable Market Index. Its portfolio spans developed countries such as Japan, the U.K., Germany, Australia and France, but notably excludes Canada, as it is considered part of North America.
IEFA has an older counterpart in the iShares MSCI EAFE ETF (EFA), which launched back in August 2001. However, EFA’s portfolio is more limited, holding fewer than 700 stocks compared to the roughly 2,600 in IEFA, due to its exclusion of small-cap names. Additionally, EFA is significantly more expensive with a 0.32% expense ratio, while IEFA charges just 0.07% as part of iShares’ low-cost “core” ETF lineup.
iShares Core MSCI Emerging Markets ETF (IEMG)
The emerging markets counterpart to IEFA is IEMG. It tracks the MSCI Emerging Markets Investable Market Index, offering exposure to more than 2,600 stocks across large-, mid- and small-cap companies. A few countries dominate the portfolio, with China, India and Taiwan representing the largest allocations. South Korea also makes up about 11% of the fund, though that comes with an asterisk.
While MSCI classifies South Korea as an emerging market, other index providers like FTSE categorize South Korea as a developed market. Like IEFA, IEMG also has an older sibling in the iShares MSCI Emerging Markets ETF (EEM), which charges a steep 0.72% expense ratio. At a 0.09% expense ratio, IEMG is the better long-term choice for most investors, but some traders still use EEM for options.
Xtrackers MSCI EAFE Hedged Equity ETF (DBEF)
Most international stock funds are denominated in U.S. dollars, but the underlying securities trade in foreign currencies. When the U.S. dollar strengthens, the returns of those foreign holdings get translated back at a less favorable exchange rate. This can drag down overall performance even if the local market did well. DBEF solves this issue by tracking the MSCI EAFE US Dollar Hedged Index.
“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,” explains Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group. DBEF charges a 0.35% expense ratio.
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 1.3 times that of the MSCI EAFE Index, along with screens for dividend sustainability and persistence.” Right now, DBEF is paying a 4.2% 30-day SEC yield.
Dividend-paying funds can lag during periods where growth stocks outperform, but HDEF has held up quite well. Since its inception in August 2015 through the end of May 2025, the ETF delivered a 6.4% annualized return, slightly outperforming its underlying benchmark, which returned an annualized 6.3%. However, this was before the impact of taxes, which if applied, would likely cause greater drag for HDEF due to the higher income paid.
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7 Best International Stock Funds to Buy for 2025 originally appeared on usnews.com
Update 06/30/25: This story was published at an earlier date and has been updated with new information.
