Look overseas for opportunities in stocks
There's a whole universe of investment opportunities outside of the U.S. International stocks in developed and emerging markets provide investors with diversification across global regions in various sectors and asset classes. As global economic recovery is shaping up post-pandemic, the investing landscape favors international investments. "We have a positive view on international equities given attractive valuations and a forecast for a weakening U.S. dollar and global synchronized growth in 2021," says Frank Lee, managing director at Miracle Mile Advisors in Los Angeles. This provides a tailwind for international equities and presents attractive opportunities for U.S. investors who are considering expanding their exposure to this market. Here are eight of the best international stock funds to buy in 2021.
Fidelity International Index Fund (ticker: FSPSX)
For investors interested in exposure to international funds in developed markets at a very low expense, FSPSX has you covered. Since its inception in 1997, FSPSX has tracked the MSCI EAFE Index, giving investors access to companies across more than 20 developed countries. The fund invests in companies with a market capitalization of more than $10 billion, with a focus on growth and value stocks. The portfolio holds 892 companies and is weighted across different market sectors including financials at about 16%, industrials at about 15% and health care at about 12.5% as its top three sectors. The fund's holdings are regionally diversified among Europe, Japan and Asia Pacific (excluding Japan), with only 0.05% allocated toward U.S. investments. FSPSX has a one-year return of more than 9%.
Expense ratio: 0.03%
Market value: $46 per share
Vanguard Global Equity Fund (VHGEX)
This Vanguard fund gives investors access to various regional opportunities and holds more than 50% of its assets in the U.S. Since its inception in 1995, VHGEX has beat its benchmark at 9.5% versus 7.5%. Given the fund's allocation to U.S. equities, Vijay Khetarpal, president and CEO of Integrity Financial Group in Vienna, Virginia, says VHGEX is particularly good when an investor wants or needs just one fund for global exposure. VHGEX has a competitive one-year return of around 24% and requires a minimum investment of $3,000. International funds may be subject to high volatility, a common characteristic of foreign equities, so investors must have the appropriate risk tolerance and investing strategy to hold this global equity fund.
Expense ratio: 0.45%
Market value: $39 per share
iShares MSCI Emerging Markets ETF (EEM)
Emerging-market investments may be appealing for their high growth potential. According to the International Monetary Fund, emerging markets and developing economies are poised to outperform advanced economies in 2021, with 8.3% growth potential in emerging markets for Asia, compared with advanced economies with 4.3% expected growth. This iShares fund offers international stock exposure exclusively to emerging-market equities, and boasts a one-year return of about 17.5%. China has a prevailing geographic presence in the fund, with about a 40% allocation. EEM also makes for an attractive fund for value investors.
Expense ratio: 0.7%
Market value: $56 per share
Aberdeen China A Share Equity Fund (GOPAX)
China was the first country to begin an economic recovery from the pandemic and see economic growth in 2020. For investors interested in Chinese stocks, Aberdeen's GOPAX could be a good choice. Since it takes an active investment approach, the fund has a higher net expense ratio, overshadowed by the fund's impressive one-year annualized return of about 56%. GOPAX requires a minimum investment of $1,000. Robert Johnson, professor of finance at the Heider College of Business at Creighton University in Omaha, Nebraska, says while it's a good choice for an investor who wants exposure to the Chinese market, he cautions that this fund should be part of a broader set of global holdings rather than a single fund representing an investor's global allocation.
Expense ratio: 1.34%
Market value: $42 per share
SPDR Portfolio Europe ETF (SPEU)
SPEU offers region-specific exposure to European equities. Investments from Western European countries include the United Kingdom, France, Switzerland, Germany, Sweden and the Netherlands, among many others. This exchange-traded fund offers great diversification across various sectors and different European countries. Since its inception in 2002, SPEU has provided returns in line with its benchmark, the STOXX Europe Total Market Index, and is currently up more than 7% for the year. SPEU also has a competitive dividend yield of 2.28%.
Expense ratio: 0.09%
Market value: $38 per share
DWS Latin America Equity Fund (SLANX)
Latin America can be seen as a strategic geographic region for international investment opportunities due to the region's rising middle class, global trade relationships and attention to sustainability projects. SLANX's portfolio composition includes a geographical distribution of Brazil, Mexico, Argentina, Chile, Peru and Colombia. The fund has a high turnover ratio of 150%, which means assets are bought and sold quite frequently. That said, make sure the fund aligns with your investment goals and strategy. Johnson points out the fund's low price-to-earnings ratio, which he says would likely be attractive to a value investor looking to expand beyond U.S. markets. "Again, it should not represent the entirety of an investor's international stock exposure but should be held with funds representing other geographies," Johnson stresses.
Expense ratio: 1.57%
Market value: $34 per share
Fidelity International Real Estate Fund (FIREX)
Real estate as an asset class offers uncorrelated diversification. With this Fidelity fund, investors can add another layer of diversification by gaining exposure to global real estate investments. Its top two holdings are Vonovia SE, a leading German residential real estate company, and Mitsubishi Estate, one of the largest real estate developers in Japan. Investors should note that regions like Hong Kong may represent geopolitical risk, which could impact investment returns. FIREX has a positive performance history, with 10-year average returns of about 7.8%. Over the life of the fund, which started in 2004, it has returned 6.65%.
Expense ratio: 1%
Market value: $13 per share
iShares MSCI Pacific ex Japan ETF (EPP)
Many international funds offer exposure to Japan, but for investors who prefer access to other regional markets, EPP has that option. This ETF may suit investors who are concerned about Japan's economy as the country grapples with its large national debt. EPP's investments focus on developed markets in the Pacific region. This ETF helps investors with diversifying equities internationally while having a regional target. The geographic breakdown includes Australia, which reigns in majority allocation of 59.9%, Hong Kong at 28.4%, Singapore with 8.8% and New Zealand at 2.5%.
Expense ratio: 0.48%
Market value: $49 per share
The best international stock funds to buy:
-- Fidelity International Index Fund (FSPSX)
-- Vanguard Global Equity Fund (VHGEX)
-- iShares MSCI Emerging Markets ETF (EEM)
-- Aberdeen China A Share Equity Fund (GOPAX)
-- SPDR Portfolio Europe ETF (SPEU)
-- DWS Latin America Equity Fund (SLANX)
-- Fidelity International Real Estate Fund (FIREX)
-- iShares MSCI ex Japan ETF (EPP)