Exchange-traded Funds (ETFs) are an increasingly popular investment vehicle. Because it is so difficult for retail investors to pick individual stocks that beat the performance of a benchmark index such as the S&P 500, many people are choosing instead to invest in ETFs that track the market such as the SPDR S&P 500 ETF (NYSEARCA:SPY) that tracks the S&P 500 stock index, or the Invesco QQQ (NASDAQ:QQQ) that tracks the performance of the Nasdaq. ETFs can also track a number of stocks in a particular sector such as technology.
In 2019, assets held in U.S.-based ETFs reached a record $4 trillion. More money is now invested in ETFs than hedge funds. ETFs are known as a passive investment as they are not actively managed by a fund manager. Shares of ETFs are traded on exchanges just like a stock and rise or fall along with the market or sector they are tracking. ETFs are also cheaper to own than mutual funds that are actively managed and charge high management expense fees. The combination of low fees and market matching performance have made ETFs very popular with investors.
And while many of the top performing ETFs are focused on U.S. markets and economic sectors, there are a number of international ETFs that offer solid returns and can provide diversification to a portfolio. Here we look at seven of the best international ETFs for investors to buy for diversification.
- Invesco China Technology ETF (NYSEARCA:CQQQ)
- Vanguard FTSE Europe ETF (NYSEARCA:VGK)
- Schwab Emerging Markets Equity ETF (NYSEARCA:SCHE)
- ProShares Ultra MSCI Brazil Capped (NYSEARCA:UBR)
- Global X FTSE Nordic Region ETF (NYSEARCA:GXF)
Best International ETFs: Invesco China Technology ETF (CQQQ)
Expense Ratio: 0.7%, or $70 annually per $10,000 investment
There’s a lot of growth potential and risk with Chinese technology companies. On one hand, China is the largest and fastest growing market in the world. On the other hand, Chinese companies have a track record of accounting irregularities, fraud and embezzlement. Given this quandary, one of the best ways to invest in the potential growth of China while mitigating the risk is to invest in the country and its top tech companies through an ETF. And the Invesco China Technology ETF, known as CQQQ, is one of the very best.
The CQQ ETF provides investors with access to major Chinese technology companies such as Tencent, Baidu and NetEase, while alleviating the risk of placing money directly into each individual stock. And the CQQQ has been providing great returns to investors, up 20% year-to-date and 40% over the last 12 months.
Over the past 10 years, CQQQ has posted an average annual return of 11.8%. Ten thousand dollars invested in CQQQ in 2010 would be worth $30,523 today.
Vanguard FTSE Europe ETF (VGK)
Expense Ratio: 0.08%
Europe is home to many great companies in a wide range of industries — from technology and banks to defense and consumer product firms. And a great way to gain exposure to a cross section of European companies is through the Vanguard FTSE Europe ETF. This ETF tracks the performance of the FTSE Developed Europe All Cap Index. The nice thing about this ETF is it includes a basket of stocks from all major markets in Europe — Austria, France, Germany, Ireland, Italy, the Netherlands Switzerland and the United Kingdom, among other countries.
The companies held in the Vanguard FTSE Europe ETF include Nestle, SAP and Royal Dutch Shell, to name only a couple. The reassuring thing about European companies and markets is that they are more established and stable than in many other parts of the world. Another benefit of the VGK ETF is that Vanguard charges some of the lowest fees in the industry for its products.
The expense ratio for this ETF is just 0.08% and it pays a quarterly dividend. In terms of performance, Vanguard’s FTSE Europe ETF is up 6% year-to-date and also up 6% after 10 years.