Investors fearing increased volatility among U.S. stocks can find some shelter from that possible storm and perhaps some bargains as well with ex-US international exchange traded funds.
Beyond traditional exposure to the widely followed MSCI EAFE Index, one of the most popular benchmarks for ex-US developed market stocks, there are ETFs dedicated to dividends and the low volatility that can help investors gain international diversity with the potential for reduced turbulence.
“Indeed, a popular exchange-traded fund that tracks large- and mid-cap equities in developed markets outside the U.S. and Canada, the iShares MSCI EAFE ETF, has advanced 13 percent so far this year. The S&P 500 fund has advanced a bit less than 6 percent in the same time. Notably, the MSCI Asia Pacific index has gained 20 percent year to date; Taiwan’s benchmark index has gained 22 percent, and European markets have broadly outperformed the S&P 500,” according to CNBC.
Investors looking for the benefit of developed markets dividend payers outside the U.S. can consider the ProShares MSCI EAFE Dividend Growers ETF (BATS: EFAD).
EFAD, which debuted almost three years ago, follows the MSCI EAFE Dividend Masters Index, which holds members of the MSCI EAFE Index that have increased their dividends for at least 10 straight years. The index is equally weighted and contains a minimum of 40 stocks. No single sector may represent more than 30% of the index and no single country may represent more than 50%. The index is rebalanced each February, May, August and November, with annual reconstitution during the November rebalance.
The iShares Edge MSCI Min Vol EAFE ETF (NYSEArca: EFAV) is an avenue to consider for investors looking to skirt international volatility. EFAV, which turns six years old later this year, “seeks to track the investment results of an index composed of developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader developed equity markets, excluding the U.S. and Canada,” according to iShares.
EFAV has performed mostly inline with EFA this year, which is impressive when considering low volatility ETFs often lag their traditional counterparts on the way up while providing more protection when stocks slide.
Investors looking for a cost-effective option for EAFE exposure can consider the iShares Core MSCI EAFE ETF (NYSEArca: IEFA). One of this year’s top asset-gathering ETFs, IEFA charges just 0.08% per year, or $8 on a $10,000 investment.