International ETF Strategy to Balance Risk & Opportunity | ETF Trends

Investors seeking to expand their portfolios beyond U.S. markets may look to international exchange traded funds.

When deciding to allocate toward overseas markets, investors can look to the FTSE Global All Cap Index as a guide. Alex Bryan, an analyst covering equity strategies at Morningstar, points out that U.S. markets make up 53% of the world’s investable market capitalization, along with 40% developed international markets and 7% emerging markets.

Investors who want an all-in-one investment option can take a look at the Vanguard Total World Stock ETF (NYSEArca: VT), which tracks the FTSE Global All Cap Index.

On the other hand, people can also take a more hands on approach by retaining control over regional allocations.

“This approach allows investors to maintain a more consistent level of portfolio risk (as stocks in each region have different risk characteristics) and rebalance opportunistically to take advantage of attractive valuations,” Bryan said.

For developed market exposure, the iShares MSCI EAFE ETF (NYSEArca: EFA) and Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) target developed Europe, Australia and Asian economies.