Smart investors understand that diversifying your portfolio by investing in international stocks is a good idea. With that in mind, we've produced a list of the best international mutual funds, including index funds for the more conservative investor and emerging markets funds for the more ambitious. Mutual funds that invest in overseas equities are more likely to have higher market risk than those that invest in domestic stocks, but this can open up more chances for investors prepared to face those risks.
Here are a few of the best foreign index funds to consider
International Index Funds with the Best Performance
At a modest cost, index funds can provide broad and diversified exposure to a big segment of international markets.Vanguard Total International Stock Index (VTIAX)
VTIAX is difficult to beat for wide exposure to foreign stocks in both established and emerging economies. The product is based on the FTSE Global All Cap ex U.S. Index, including 7,455 non-US equities. With a minimum investment of $3,000, VTIAX has a low expense ratio of 0.11 percent. VXUS is the symbol for the ETF option.Fidelity International Index Fund (FSPSX)
This is another excellent international index fund that offers broad and low-cost exposure to overseas stocks. The MSCI EAFE index, which includes hundreds of non-US stocks from 21 developed economies, is tracked by FSPSX. FSPSX has a low expense ratio of 0.035 percent and no minimum investment requirement.Vanguard European Stock Index (VEUSX)
This might be the greatest index fund for European stock purchases. When you invest in index funds, you're attempting to match the index's performance, which this fund has done in the past. The FTSE Developed Europe All Cap Index, which includes 1,267 European equities, is followed by VEUSX. The expenditure ratio is 0.10 percent, with a $3000 minimum initial investment.Emerging Markets Investment Funds
Aggressive stock funds, such as those investing in developing countries and/or small- and mid-cap stocks of non-U.S. companies, are available for investors prepared to face a higher level of risk in exchange for the prospect of larger returns.The Fidelity Total Emerging Markets Fund (FTEMX)
This fund primarily invests in emerging market stocks, although it also has a bond portfolio. As a result, investors receive a mix of equities and bonds in a fund with a track record of outperforming the market. The expense ratio of 1.16 percent is typical for mutual funds developing markets, and there is no minimum initial investment requirement.MSMLX (Matthews Emerging Emerging Markets Small Companies Fund)
It is one of the best funds to invest in if you want a top-rated fund that focuses on Asia. Matthews Asia is an Asian-focused mutual fund with experience and knowledge in investing in nations such as China, India, and the Philippines. Although the expense ratio of 1.42 percent is higher than the industry average for emerging markets mutual funds, the competent management team may be worth the extra cost. The initial investment requirement is $2,500.Wasatch International Opportunities (WAIOX)
If you're ready to take on even more risk, a fund like WAIOX that invests in smaller foreign companies can be a good option. Investing in tiny businesses can yield strong long-term returns, but there are no guarantees. WAIOX has a track record of outperforming its peers. The expense ratio of 2.02% is high for its category, but the profits may be worth it. The initial investment is a minimum of $2,500.Fidelity International Small-Cap Fund (FISMX)
It is a good option for investors who want to concentrate on small-cap emerging markets stocks. The Fidelity International Small-Cap Fund, like the Wasatch fund, has traditionally delivered exceptional returns when compared to other emerging market funds. FISMX, on the other hand, has a reduced expense ratio of 1.08 percent and no minimum initial investment.Questions and Answers (FAQs)
What are the tax implications of investing in international index funds?
Many countries have tax arrangements with the United States that prevent double taxation of overseas capital gains. The tax implications of investing in overseas index funds will be the same as investing in U.S. stocks for the ordinary investor. When you earn capital gains (i.e., when you sell shares at a profit) or when the fund distributes dividends, you'll produce taxable events. If your fund owes foreign taxes, they will most likely be covered by fund managers and deducted from payouts.How much of your portfolio should be made up of international stocks?
International equities give portfolio diversification, but they are often riskier investments than U.S. stocks. It may be a good idea for investors to allocate between 10% and 20% of their portfolio to stocks. The Balance does not offer tax, investment, or financial advice or services. The material is being provided without taking into account any specific investor's investment objectives, risk tolerance, or financial circumstances and may not be suitable for all investors. Past performance does not guarantee future outcomes. Investing entails risk, including the possibility of losing money.