I have been an investor in the stock market for over 20 years, but I find it much more comfortable to evaluate US stocks than international ones, even though there are some excellent investment opportunities outside of the major U.S. stock markets. It can be difficult to assess things like geopolitical risks, foreign regulatory risks, currency risks, and more.
But just because I don’t want to buy individual international stocks doesn’t mean I don’t want exposure. There are some great international exchange-traded funds (ETFs) out there, and there are two in particular that I’m keeping an eye on at the moment.
International Income Shares
I tend to lean towards value stocks and dividend growth investments in my portfolio, so an ETF like the iShares International Select Dividend ETF (NYSEMKT: IDV) seems like a natural fit. The fund focuses on developed markets, with significant exposure to the UK, Italy, Spain, France and Canada, to name the largest geographic areas.
As of August 26, the ETF holds 123 different stocks and is a weighted index fund, meaning larger companies make up a larger portion of the portfolio. To name a few holdings: British American Tobacco, BHP GroupAnd Mercedes-Benz are among the largest in the portfolio.
The iShares International Select Dividend ETF has an expense ratio of 0.51%, which is certainly on the high side for an index fund. But generally speaking, the more specialized an index fund, the more you can expect to pay in investment fees. Income investors might like this ETF: at the time of writing, it has a dividend yield of 6.2% and offers plenty of upside potential over the coming years.
Many opportunities in emerging markets
The Vanguard Emerging Markets Index Fund ETF (NYSEMKT: VWO) is an incredibly efficient way to gain exposure to emerging market equities, with an extremely low expense ratio of just 0.08%.
This is an extremely diverse ETF with more than 5,900 stocks. Nearly three-quarters of the fund’s holdings are based in China, India or Taiwan, and several of the top holdings in the weighted index are well known to U.S. investors, including Taiwanese semiconductor production, Tencent HoldingsAnd Alibaba.
Emerging market stocks look like excellent value right now. The average earnings growth of stocks held by the ETF is 16% per annum over the past five years, and the average valuation is just 15 times earnings.
It’s also worth noting that while emerging markets are often viewed as speculative investments for growth-oriented investors, that’s not entirely true. For starters, the Vanguard Emerging Markets ETF has a substantial dividend yield of 3.1%. What’s more, you might be surprised to learn that the ETF has a beta of 0.9 – anything below 1 indicates that an investment tends to be less volatile than the S&P 500.
Two great but very different choices
For some investors, one of these options may be the obvious choice. If your priority is steady income, the iShares International Dividend ETF is probably the best choice for you, and if you’re more of a deep value seeker, the Vanguard Emerging Markets ETF may be a better option.
To be clear, I don’t think investors looking for international stock exposure can go wrong with either ETF; I’m considering both for my own portfolio. So if you’re looking to add some international stocks without having to pick and choose individual companies, these are two solid choices worth taking a closer look at.
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard International Equity Index Funds-Vanguard Ftse Emerging Markets ETF. The Motley Fool has a disclosure policy.
I don’t want to buy international stocks, but these 2 ETFs could be a great way to get exposure was originally published by The Motley Fool
