3 International ETFs to Buy for a Diversified Portfolio

Some international markets may prove more resilient against economic downturns, and exposure to them may strengthen your portfolio during crashes and recessions.

| More on:
ETF chart stocks

Image source: Getty Images

Investing in good international securities is challenging, unless they are cross-listed and traded on the local market. But if your aim is broad international exposure — i.e., to markets instead of specific foreign stocks, international ETFs are the way to go. You can invest in specific “segments” or the whole market with the relevant ETFs.

And if international exposure is your goal, there are three ETFs you may consider looking into.

An international ETF

When looking for a geographically diversified portfolio, one interesting choice is Vanguard FTSE Global All Cap Excluding Canada Index ETF (TSX:VXC). This gives you exposure to several international markets at once and an impressive number of international stocks — over 11,000. Geographically, the U.S. companies carry the most weight in this ETF (about 61%), followed by Japan (6.3%).

This means that the U.S. market has a lot of sway in how this ETF performs. From a performance perspective, the ETF has been relatively consistent and modestly rewarding.

The ETF has returned over 80% since its inception in July 2014, and if we add its distribution to the mix, the fund has doubled its investors’ capital in this ETF in over eight years. It also comes with a modest management expense ratio (MER) of 0.21%.

A European ETF

Europe is an excellent place to start if you want to invest in a specific region. BMO MSCI Europe High Quality Hedged to CAD Index ETF (TSX:ZEQ) gives you exposure to 127 European companies. About 50% of the fund’s weight is concentrated (not equally) in three countries: Switzerland, the U.K., and France. It comes with a medium-risk rating and an MER of 0.45%, which is on the higher side of an ETF.

The fund offers quarterly distributions, and the current yield of 2.35% is quite decent. The fund also doesn’t disappoint when it comes to performance. It returned over 50% to its investors in the last five years and about 115% since its inception (Feb. 2014). If the fund keeps performing the same way, you may expect great returns if you hold it for an adequate length.

A U.S. ETF

This is usually the first place most Canadian investors start when looking for geographic diversification. And a U.S. ETF like RBC Quant US Equity Leaders ETF (TSX:RUE) can be an excellent way to access the U.S. market. It gives investors exposure to some of the best long-term growers in the U.S. market. Currently, the portfolio is made up of 175 companies, with IT as the leading sector.

Thanks to the underlying stocks, the ETF has performed exceptionally well since its inception (May 2015), and at its peak, it offered about 125% growth in around six-and-a-half years. And that doesn’t include the quarterly distributions the fund makes. It has a medium-risk rating, and the MER is relatively high at 0.44%, though it may be the best grower out of the three.

Foolish takeaway

Whatever side of the ETFs vs. index funds debate you lean toward, two out of the three ETFs might be the right fit for you, as they both follow an index. And with the three ETFs in your portfolio, you gain access to multiple international markets and decent growth potential.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

The sun sets behind a high voltage telecom tower.
Dividend Stocks

Should You Buy Northland Power for its 5% Dividend Yield?

Northland Power stock trades 52% below all-time highs and offers shareholders a tasty dividend yield of 5% right now.

Read more »

TFSA and coins
Dividend Stocks

2 Top Stocks to Add to Your TFSA in February 2024

These two TSX stocks can be excellent holdings for your self-directed TFSA portfolio to inject stability and tax-free wealth growth.

Read more »

dividends grow over time
Dividend Stocks

Passive-Income Seekers: Invest $10,000 for $400 or More in Annual Income

Are you interested in generating passive income? Invest $10,000 for a hefty annual income!

Read more »

Canadian Dollars
Dividend Stocks

Want Decades of Passive Income? 3 Stocks to Buy Now

Want passive income that could last a lifetime? These three top Canadian dividend stocks have a good chance of delivering…

Read more »

Two seniors float in a pool.
Dividend Stocks

Retiring on Dividends: How Much Do You Need to Quit Work?

Canadians might need more than $1 million to quit work, but can still live comfortably in retirement with sustained dividend…

Read more »

Happy couple being attended by office worker at office
Dividend Stocks

New Investors: 3 Top Tips to Get You Started

New investors may be itching to get started, but first, ensure you are properly set up and do your research!

Read more »

A plant grows from coins.
Dividend Stocks

With a 7.9% Dividend, This TSX Stock Can Help You Make $1,975 Per Year

Make steady income with this high yield dividend stock. This Canadian corporation has increased its dividend for 29 years.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »