Top International ETFs for Diversification

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Mar 22, 2026

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Diversify your portfolio with the best international ETFs. Explore top performing ETFs for global market exposure and reduced risk.

Why Go International?

Seriously though, why limit yourself? The US stock market has been on a tear lately, but history shows us that different markets take turns outperforming. Relying solely on the US means you could miss out on significant growth opportunities elsewhere. Plus, international exposure can help cushion your portfolio during downturns in the US economy. It's all about not putting all your eggs in one basket. Here's a few concrete reasons:

Growth Potential: Emerging markets, in particular, can offer higher growth potential than developed markets, although with potentially higher volatility. Think of companies poised to boom in economies that are just taking off.

Diversification: Different economies react differently to global events. When the US sneezes, Europe might just get a mild cold. Diversification can smooth out the bumps in your investment journey.

Access to Different Sectors: Some countries specialize in particular industries. Want exposure to the luxury goods market? Europe might be a good place to look. Interested in technology manufacturing? Asia could be your answer.

Currency Hedging (Sometimes): Some international ETFs offer currency hedging, which can protect your returns from fluctuations in exchange rates. This is a bit more complex, but essentially, it can reduce the impact of a weakening dollar on your international investments.

Risks to Consider

Of course, it's not all sunshine and roses. International investing comes with its own set of risks:

Political and Economic Instability: Some countries are simply more politically or economically unstable than the US. This can lead to unexpected market shocks.

Currency Risk: As mentioned earlier, currency fluctuations can impact your returns, especially if the ETF doesn't hedge against it. A strengthening dollar can erode your profits when you convert your foreign investments back into dollars.

Information Asymmetry: It can be harder to get reliable information about companies in some foreign markets, making it more difficult to assess their true value.

Higher Fees: International ETFs often have slightly higher expense ratios than domestic ETFs, although competition is driving these fees down.

Top International ETFs to Consider

Okay, now for the good stuff! These are some of the international ETFs that I’ve found to be compelling choices for building a globally diversified portfolio. Remember, this isn't a one-size-fits-all recommendation. You need to consider your own risk tolerance, investment goals, and time horizon. Do your research!

Broad Market ETFs

These ETFs aim to provide exposure to a wide range of international stocks, giving you instant diversification.

Vanguard FTSE All-World ex-US ETF (VEU): This is a classic choice. It tracks the FTSE All-World ex US Index, giving you exposure to both developed and emerging markets (excluding the US, obviously). It's known for its low expense ratio and broad diversification. If you want a simple, low-cost way to dip your toes into international waters, VEU is a solid option.

iShares MSCI EAFE ETF (EFA): EFA focuses on developed markets outside of the US and Canada. It tracks the MSCI EAFE Index. While it doesn't include emerging markets, it can be a good choice if you want to focus on more established economies.

iShares Core MSCI Total International Stock ETF (IXUS): Similar to VEU, IXUS provides broad exposure to both developed and emerging markets, excluding the US. It's another low-cost option to consider.

Emerging Markets ETFs

These ETFs focus specifically on emerging markets, offering higher growth potential but also higher risk.

Vanguard FTSE Emerging Markets ETF (VWO): This is one of the most popular emerging markets ETFs. It tracks the FTSE Emerging Markets All Cap China A Inclusion Index. Be aware that it has a significant weighting in China.

iShares Core MSCI Emerging Markets ETF (IEMG): Similar to VWO, IEMG provides broad exposure to emerging markets. It tracks the MSCI Emerging Markets Investable Market Index.

Schwab Emerging Markets Equity ETF (SCHE): SCHE is another low-cost option for investing in emerging markets. It tracks the FTSE Emerging Markets Index. It's a good alternative if you're looking for a slightly different weighting than VWO or IEMG.

Developed Markets ETFs

These ETFs focus on developed markets outside of the US.

iShares MSCI EAFE Value ETF (EFV): If you're a value investor, EFV could be a good option. It focuses on value stocks in developed markets outside of the US and Canada.

Schwab International Equity ETF (SCHF): SCHF tracks a broad range of developed-market stocks (excluding the US). It is a lower cost option that can keep investment expenses to a minimum.

Specific Country ETFs

For more targeted exposure, you can consider ETFs that focus on specific countries. However, remember that this increases concentration risk. I generally don't recommend putting a large portion of your portfolio into a single country ETF unless you have a very strong conviction about its future prospects.

iShares MSCI Japan ETF (EWJ): For exposure to the Japanese market. Japan is one of the world's largest economies and offers exposure to a variety of industries.

iShares MSCI Germany ETF (EWG): For exposure to the German market. Germany is a major economic powerhouse in Europe.

iShares MSCI India ETF (INDA): For exposure to the Indian market. India is one of the fastest-growing economies in the world, with a large and young population.

Dividend-Focused ETFs

If you're looking for income from your international investments, consider these dividend-focused ETFs:

Vanguard International Dividend Appreciation ETF (VIGI): This ETF focuses on companies outside the US that have a history of increasing their dividends.

Schwab International Dividend Equity ETF (SCHY): SCHY tracks an index of high-dividend-yielding international stocks. It is a lower-cost alternative to VIGI.

Things to Consider When Choosing

Before you jump in and buy any of these ETFs, here are a few things to keep in mind:

Expense Ratio: This is the annual fee charged by the ETF. Look for ETFs with low expense ratios to minimize costs. A difference of even 0.1% can add up over time.

Tracking Error: This measures how closely the ETF's performance tracks its underlying index. Look for ETFs with low tracking error.

Liquidity: Make sure the ETF is actively traded so you can buy and sell shares easily. Check the average daily trading volume.

Holdings: Take a close look at the ETF's top holdings to understand what companies you're actually investing in.

Index Provider: Understand the methodology of the index the ETF tracks. Different indexes have different rules for inclusion and weighting.

Building Your International Portfolio

So, how do you put all of this together? Here's a hypothetical example of how I might allocate my international investments, assuming a moderate risk tolerance and a long-term investment horizon (planning for retirement in 2046, for example). Remember, this is just an example, and your own allocation should be tailored to your individual circumstances.

VEU (Vanguard FTSE All-World ex-US ETF): 40% - A core holding for broad international exposure.

VWO (Vanguard FTSE Emerging Markets ETF): 30% - To capture growth potential in emerging markets.

EFA (iShares MSCI EAFE ETF): 20% - Focusing on developed markets for stability.

INDA (iShares MSCI India ETF): 10% - A smaller allocation to a specific high-growth market.

This allocation gives me a good balance between developed and emerging markets, while also allowing me to overweight emerging markets slightly for potentially higher growth. If I were more risk-averse, I might reduce my allocation to VWO and increase my allocation to EFA.

A Quick Story

I remember back in 2010, I was hesitant to invest internationally. The US market was doing well, and I thought, "Why bother?" But a friend convinced me to diversify, and I'm so glad I did! When the US market had a rough patch a few years later, my international investments helped to soften the blow. That experience really hammered home the importance of diversification.

Rebalancing is Key

Don't just set it and forget it! It's important to rebalance your portfolio periodically to maintain your desired asset allocation. Over time, some investments will outperform others, causing your portfolio to drift away from your target allocation. I generally rebalance my portfolio annually, but you can do it more or less frequently depending on your preferences.

Let's say, by 2026, my emerging markets allocation (VWO) has grown to 40% of my international portfolio, while my developed markets allocation (EFA) has shrunk to 15%. To rebalance, I would sell some of my VWO holdings and buy more EFA holdings to bring them back to their target allocations.

Remember:

Rebalancing helps you maintain your desired risk level.

It can also help you buy low and sell high.

Set a schedule and stick to it.

Bottom Line

Investing in international ETFs is a smart way to diversify your portfolio, access growth opportunities around the world, and potentially reduce your overall risk. By carefully considering your investment goals, risk tolerance, and the specific characteristics of each ETF, you can build a well-diversified international portfolio that helps you achieve your long-term financial goals. It’s not about chasing the hottest market, but building a portfolio that can weather various economic storms and provide consistent returns over time. Don't be afraid to explore the world of international investing – you might be surprised at what you find!

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Some links may be affiliate links.