When it comes to investing, everyone has their reasons for investing and the strategies they use. But what’s universal with all investors is the need to diversify your portfolio. Diversification helps spread your risk by placing your money in different investments rather than putting everything into one basket. But when it comes to investing, there are so many ways you can go about doing that. There are countless investment options available, from stocks, bonds, mutual funds, and more – but what about international ETF as a way of diversifying your portfolio? The truth is that there are many benefits to using an international ETF as a part fund of your investment strategy. This article will discuss how you can use an international ETF to diversify your portfolio and improve its performance over time.
An international ETF, or an exchange-traded fund, is a type of mutual fund traded on stock exchanges. Although ETFs have been around since 1989, they’re relatively new to the investment scene, and many people aren’t familiar with them. But they’re a great and effective way of diversifying your portfolio and investing internationally. An ETF is a basket of stocks designed to track a specific index, such as the S&P 500, the Dow Jones Industrial Average, or the NASDAQ. An international ETF is a basket of stocks designed to track specific indexes in different countries. An international ETF is an investment that can be traded like a stock, which means you can buy or sell one whenever you want to. You don’t have to wait for a specific time of the year like you would with a mutual fund.
One of the most important things about investing is that you have to have an eye for risk. The riskier you are with your investment strategy, the higher the chance you could lose money. The key to successful investing is to strike a balance between risk and reward. You want to invest enough that you see growth and profit, but you don’t want to risk losing all of your money. This is where diversification comes in. Suppose you place your money in various assets. In that case, you can limit your risk by spreading your money among many different things. If one investment loses money, it may be offset by another one that makes a profit.
There are many benefits to using an international ETF as part of your investment strategy, including:
Increased Diversification - One of the biggest benefits of using an international ETF is that it diversifies your portfolio. A diversified portfolio will help to reduce risk and protect your investments from drops in a single industry or sector.
More Growth Potential - A portfolio that has been properly diversified is less susceptible to drastic losses. This also means that it can see more growth potential. Having a large amount of your portfolio in one or two stocks might sound like a good idea. Still, it could leave you with very little growth potential if something happens to that company.
Reduced Volatility - Having less of your portfolio in one or two stocks also reduces your risk of experiencing dramatic drops in the market. This is because when one investment goes down, another might go up. This is referred to as volatility, and it’s how investment professionals measure risk.
When deciding which international ETF to invest in, there are several things to remember. You need to make sure that any ETFs you invest in are properly diversified. You also need to ensure that they have low fees, high liquidity, and top-notch investments. You also want to pay attention to what index an ETF is tracking. Some indexes are better than others, and some will give higher returns than others. You also need to ensure that an ETF is not too heavily weighted in any sector or country. You should also remember that investing in an ETF is not the same as investing in stocks. Investing in an ETF does not give you any voting power over the company’s decisions. Rather, it allows you to receive a portion of the company’s profits in the form of dividends.
The iShares Core MSCI Emerging Markets ETF (symbol: IEMG) is a low-cost fund that tracks the MSCI Emerging Markets Index by investing in companies from countries like China, South Korea, and Brazil. IEMG has an expense ratio of just 0.25%—one of the lowest in the industry. This fund is mainly used for broad emerging markets exposure. This ETF is very low-risk due to its low volatility, high liquidity, and high yield. Additionally, it has a very high daily trading volume and is currently at the top of its 52-week trading range. With total assets under management of about $4.6 billion, this fund is one of the most popular on the market.
The iShares Core MSCI World ETF (symbol: IXUS) is a great tool for investors looking for a low-cost way to gain exposure to the global stock market. This fund tracks the MSCI World index and invests in stocks of developed market countries worldwide, including the U.S., Japan, and the U.K. IXUS has a very low expense ratio of just 0.15% and low volatility and high liquidity. This fund is mainly used for broad-based exposure to the global stock market. It is a great choice for investors who want to take advantage of long-term growth opportunities but are worried about short-term market volatility. With total assets under management of over $13 billion, IXUS is one of the most popular international ETFs in the industry.
The iShares International Select Dividend ETF (IDV) is a great global fund for dividend-oriented investors. This ETF tracks the FTSE Developed ex-US High Yield Dividend Index, which focuses on companies with a high dividend yield (over 2%). IDV is mainly used for exposure to companies in developed markets that pay high dividends. This fund is generally low risk and has low volatility, high liquidity, and high yield. Additionally, it has a daily trading volume of over $1 billion and is at the top of its 52-week trading range. With total assets under management of over $1.8 billion, IDV is one of the most popular ETFs in the industry.
The Vanguard FTSE Developed All-World ex-US ETF (symbol: VDU) is a great fund for investors who want broad-based exposure to developed markets around the world. This fund tracks the FTSE Developed ex-US index, investing in stocks of companies in Europe, Japan, Australia, and other developed countries outside of the U.S. VDU has a very low expense ratio of just 0.12% and has low volatility and high liquidity. This fund is mainly used for broad-based exposure to the global developed equity market. It is a great choice for investors who want to take advantage of long-term growth opportunities but are worried about short-term market volatility. With total assets under management of just over $1 billion, VDU is a fairly new fund with much potential.
The international ETFs listed above are some of the best for investors who want to diversify their portfolios and expand their investment horizons beyond the borders of their home markets. Although international investing can be more volatile than domestic investing, the right international ETFs can offer you access to large-cap companies in new markets that may be outperforming your current holdings.