International stocks can give investors a wider portfolio reach, especially if the tide eventually turns and the steam of a market rally in U.S. equities runs out.
That said, the obvious benefit of international stock exposure is the diversification aspect. Different countries will be in various stages of the economic cycle, so upside can be captured with the right mix of holdings.
“Some investors want foreign stocks in their portfolios to round out their exposure to the global stock market and widen their investment opportunity set,” Morningstar’s Susan Dziubinski noted.
As mentioned, getting international exposure now sets up portfolios for future gains if U.S. stock performance begins to wane. U.S. equities have been stellar performers for an extended period, warranting the notion of skewing portfolios towards international equities to capture early upside before a more profound move occurs.
“Others may want to tilt their portfolios toward international stocks after a period of U.S. stock dominance like the one we’ve seen in the past several years,” the article added. “By mid-May 2023, the return of the average U.S. large-blend fund had trounced the return of the average foreign large-blend fund by 6 full percentage points annually over the trailing decade.”
Opt for a Quality International ETF
In the current market environment where central banks are still tinkering with interest rate policy without spinning their respective economies into a recession, it’s best to opt for quality. That’s exactly what the American Century Quality Diversified International ETF (QINT) does in the convenience of one fund.
Per its fund description, QINT seeks to capture the performance of large- and mid-capitalization companies outside the U.S. that possess attractive quality, growth, and valuation fundamentals. QINT follows the American Century Quality Diversified Intl Equity Index, which offers investors a wide array of diversification that focuses on quality.
More specifically, the index includes the stocks of companies based in developed economies outside the U.S. and companies based in the rising economies of Taiwan, South Korea, Hong Kong, and China. In essence, the fund includes a mix of developed markets as well as emerging markets that offer growth exposure. All in all, the fund includes 374 holdings as of April 30, which helps to avoid over-concentration and mitigate risk.
Diving deeper into its holdings, the diversification lends itself to the variety in its sector exposure. The top four sectors invested, as of April 30, are industrials (15%), financials (14%), healthcare (14%), and consumer discretionary (13%).
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