Ex-U.S. equities and international ETFs (exchange-traded funds) are lagging their domestic counterparts this year. As of this writing, the widely followed MSCI EAFE Index is down 1.73% year-to-date compared to a 4% YTD gain for the S&P 500.
Europe has been something of a trouble spot for international ETFs this year. A recent uptick in political volatility in Italy — which stirred speculation of a departure from the European Union — weighed on financial assets in the Eurozone’s third-largest economy. Additionally, many market observers are convinced the European Central Bank (ECB) is nearing the end of its easy monetary policies. Still, the MSCI EMU Index is up almost 1% this year.
Additionally, European and international funds do face other uncertainties moving forward.
“Other uncertainties include the impact of hefty U.S. fiscal stimulus on growth and the duration of this cycle,” said BlackRock. “Yet unless European fragmentation risks intensify dramatically, we don’t see European risks denting our outlook for the sustained global economic expansion to roll on.”
Still, recent pullbacks by international funds could give way to opportunity for prescient investors, particularly as valuations become more compelling. Consider the following international ETFs for account-growing opportunities.
International ETFs to Grow Your Capital:
iShares MSCI Eurozone ETF (EZU)
Expense Ratio: 0.49% per year, or $49 on a $10,000 investment.
The iShares MSCI Eurozone ETF (CBOE:EZU) tracks the aforementioned MSCI EMU Index, so this international fund’s year-to-date performance is not much to write home about. Still, EZU is modestly higher. Fortunately, Italy is merely EZU’s fifth-largest country weight at 7.32%.
Lingering Italian political risk is concerning for Eurozone banks, the largest sector weight in EZU at about 18 percent.
“The looming risk, however, is likely to keep credit and sovereign spreads elevated in Italy and peripheral Europe,” said BlackRock. “It may also lead to sustained lower valuations for European equities versus global ones, particularly banks.”
Fortunately, EZU’s largest country weights, France and Germany, are more exposed to global growth and that limits some of this international fund’s downside in the coming months.
International ETFs to Grow Your Capital:
BlueStar Israel Technology ETF (ITEQ)
Expense ratio: 0.75% annually, or $75 on a $10,000 position.
As a single-country sector ETF, the BlueStar Israel Technology ETF (NYSEARCA:ITEQ) is a tactical idea among international ETFs. It is also a rewarding international fund as highlighted by a year-to-date gain of almost 8% and the fact that it hit another all-time high on June 14th.
Israel is a developed market, but one that is under-represented in conventional developed markets benchmarks like the MSCI EAFE Index. The country’s lack of representation in standard international funds make ETFs such as ITEQ solid ideas for investors looking for single-country exposure to ex-US markets that offer upside with less volatility than an emerging economy. There are other reasons for portfolios to visit Israel, many of which have been on display over the past 18 months.
Over that period, “several records were set including the largest-ever acquisition of an Israeli information technology company; the largest-ever acquisition of an Israeli bio-tech/pharmaceuticals company; the best twelve-month period of performance by Israeli technology stocks on record (other than the 2009 rebound from the lows of the global financial crisis); and the first-ever systematic allocations by Israeli institutional investors into broad, deep, complete, and diversified portfolios of Israeli technology stocks,” according to BlueStar Indexes.
International ETFs to Grow Your Capital:
Schwab International Small-Cap Equity ETF (SCHC)
Expense ratio: 0.12% per year, or $12 on a $10,000 investment.
Although international ETFs have scuffled a bit this year, flows data suggest some of these funds remain in favor with investors. The international funds investors overwhelmingly embrace are low-cost products and the Schwab International Small-Cap Equity ETF (NYSEARCA:SCHC) meets that criteria.
With an annual fee of just 0.12%, SCHC is really cheap among international small-cap ETFs and cost-efficient relative to a broad swath of domestic small-cap strategies. Plus, international small-caps are performing better than their large-cap counterparts. SCHC is down 0.33% YTD, but still well ahead of the large-cap MSCI EAFE Index.
Notably, this international fund does not subject investors to higher risk and volatility. Over the past three years, SCHC’s annualized volatility has been less than that of the domestic Russell 2000 Index. This $2 billion international fund holds just over 2,000 stocks.
SCHC’s name is somewhat deceptive because the fund allocates 48.6% of its weight to mid-cap stocks. Japan is the fund’s largest geographic weight at 20%, a notable trait because Japanese stocks, even smaller fare, trade at discounts to U.S. equivalents.
Todd Shriber does not own any of the aforementioned securities.
Legendary Investor Louis Navellier’s #1 Stock to Buy NOW
Louis Navellier — the investor the New York Times called an “icon” — just helped investors make 487% in the booming Chinese stock market … 408% in the medical device sector … 150% in Netflix … all in less than 2 years!
Now, Louis is urging investors to get in on what may be the opportunity of a lifetime. By using a unique investment strategy called “The Master Key,” you could make hundreds of percent returns over the next few years. Click here to learn about the #1 stock recommendation from one of America’s top investors.
