A penny saved is a penny earned. Investors seeking to diversify their investment portfolios should consider broad international exchange traded funds, and a number of offerings also come with extremely cheap fees.
“Foreign developed-markets stocks can offer reasonable diversification benefits to U.S. investors,” according to Morningstar analyst Thomas Boccellari. “The fund’s broad portfolio may help diversify local-market, interest-rate, and currency risk. For example, the risk of interest rates rising may be smaller in Europe and Japan than in the United States.”
However, the potential investors need to be aware that these funds do not hedge currency risk, so a stronger dollar or weaker foreign currencies could slightly weigh on returns.
The Schwab International Equity ETF (NYSEArca: SCHF) is the cheapest international-equity ETF on the market. SCHF covers the FTSE Developed ex-US index, which is comprised of over 1,200 large- and mid-cap stocks taken from developed Europe, Canada, Asia and Australia, with a currently heavy country-focus on Japan and the United Kingdom.
Charles Schwab and the Vanguard Group offer some of the cheapest ETFs on the market. For instance, the Schwab U.S. Large-Cap ETF (NYSEArca: SCHX) and Schwab U.S. Broad Market ETF (NYSEArca: SCHB) are the two cheapest ETFs on the market with a 0.04% expense ratio. The two equity ETFs are good options to build out a core component of any diversified investment stock portfolio. [Build a Dirt-Cheap Portfolio With These ETFs]
“SCHF is a diversified low fee index fund for gaining exposure to developed international markets. The top allocations in the fund are to countries that are showing materially lower treasury yields than the United States. The expansionary policies in those countries provide a tailwind to growth that should drive up their GDP,” according to a Seeking Alpha analysis of SCHF.
Being mindful of fees has helped wealthier investors save on costs in investing over the long-term. Through cheap index-based ETF options, any long-term investor can also save on fees, paying expense ratios that are comparable to institutional fund share classes.
“When those economies are expanding, I expect the strength in sales to lead to stronger earnings and higher valuations. Therefore, I will aim to increase my international allocations over the next few months. I may place some limit orders over the weekend to begin the process of acquiring more shares,” adds the Seeking Alpha article.
Investors can trade SCHF on the Schwab ETF OneSource platform commission-free.
Schwab International Equity ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.