The U.S. stock market is obviously not the only game in town when it comes to the capital markets on a global scale. Still, domestic investors may not be looking into potential opportunities that international equities can offer them, especially at a time when market volatility dominates.
A recent Forbes article noted that international stock performance can actually outpace the U.S. in certain instances. This gives credence to getting international exposure to help not only diversify a portfolio, but to capture any upside in countries that are in various economic cycles.
“The United States doesn’t always dominate the global equity market! When U.S. stocks are facing headwinds, international stocks may rise to the occasion,” the article said. “Sustained periods of outperformance by one region have been fairly common historically.”
The article noted a 10-year span where international stocks actually outperformed U.S. stocks. The DotCom bubble brought a period of underperformance, and with recession risks looming for the U.S. economy in times when the U.S. Federal Reserve continues to hike rates, getting international exposure could be imperative to help protect the downside potentially for the long-term horizon.
“These bouts can be significant,” the article added. “For example, consider the ‘lost decade’ for U.S. stocks that started in the early 2000s. Between 2000 – 2009, the cumulative total return for the S&P 500 was negative 9.1% vs positive 30.7% for the MSCI All Country World Index ex U.S.”
An Active Alternative
The question now is what’s the best way to get the necessary equities exposure overseas. One can certainly research the vast universe of international stocks, but there’s an easier way.
One way to get international exposure is to opt for an exchange traded fund (ETF) that utilizes an active management strategy. One such fund is the American Century Quality Diversified International ETF (QINT).
QINT is designed to enhance core international exposure by applying a systematic methodology that emphasizes high-quality value and growth companies, primarily in developed markets. Features of the fund per its product website:
- Identifying quality companies with sound fundamentals and attractive growth and value characteristics.
- Responding to prevailing market conditions by adjusting exposure to growth and value styles.
- Managing risk through position limits and an emphasis on larger-cap/less volatile securities.
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