Foreign Stocks To Buy
International stocks: Why bother? For the greater part of the past decade, it hasn't paid to invest abroad. U.S. stocks beat their overseas counterparts in eight of the past 10 calendar years. It's little wonder that many investors now avoid foreign stock markets.
foreign stocks to buy
Many strategists predict this trend will continue. "We expect international stocks to deliver a superior return to the S&P 500 over the next several market cycles," says UBS chief investment officer of global wealth management Mark Haefele. In other words, it's time for American investors to pack up their stay-at-home strategy and go abroad.
Indeed, many investors are already rushing in, particularly in emerging markets. So far this year, emerging-markets stock and bond funds have experienced huge net inflows. But investing in foreign markets can be tricky. Uncertainty lingers about just what will happen with global economies. The war in Ukraine continues. And investors tend to be fickle about international stocks. "People get very hot and very cold quickly" about foreign stock markets, says David Marcus, chief executive of Evermore Global Advisors, often with little due diligence.
We've come up with several ways to help you navigate overseas markets. Starting with mutual funds and exchange-traded funds, we lay out what we see as the best opportunities, first by broad geographical area and then by region and country. We also highlight six foreign stocks worth buying now. But dip in slowly. "While we expect elevated levels of volatility to persist for the foreseeable future, we also see opportunities for investors amid the fog," says Ben Kirby, cohead of investments at Thornburg Investment Management. Returns and data are as of Jan. 31.
A broad-based foreign-stock index fund is a good starting place to boost your overseas holdings. The Vanguard Total International Stock ETF (Symbol: VXUS (opens in new tab), $56, Expense ratio: 0.07%) owns nearly every publicly traded foreign stock in developed and emerging markets.
The Janus Henderson Global Equity Income Fund (HFQTX (opens in new tab), 1.02%), a member of the Kiplinger 25 (our favorite no-load funds), which focuses on dividend-paying foreign stocks trading at discount prices, has done just that over the past one, three and five years. Looking ahead, comanager Ben Lofthouse thinks the fund is well positioned. The stocks in the fund sport an average price-earnings multiple of nine, based on estimated earnings for the year ahead. "It's quite unusual to see a diversified portfolio invested across all sectors trading at that multiple," he says. "And there's still so much value out there." The fund yields 3.8%.
India is the region's best long-term growth story, but it will take time. "India is set to surpass Japan and Germany to become the world's third largest economy by 2027 and will have the third-largest stock market by the end of this decade," says Ridham Desai, Morgan Stanley's chief India strategist, which means it could be a "once in a generation" opportunity for investors. The WisdomTree India Earnings Fund (EPI (opens in new tab), $33, 0.84%) stands out for its solid long-term returns and average volatility relative to peers. It tracks a proprietary index focused on profits. The more profitable the company and greater a stock's accessibility (ease of trading) to foreign institutional investors, the bigger its weight in the portfolio.
The run-up in the stock's price makes LVMH one of the largest stocks in Europe by market value. But the stock is still cheap: At an ADR price of $175, shares trade at 25 times expected earnings, a discount to its average forward P/E over the past five years of 34.
Most U.S. investors maintain a sizable home country bias: The proportion of U.S. stocks in their portfolio is overweighted relative to their allocation in the global stock market. Some investors prefer to invest solely in U.S. stocks altogether, whether out of patriotism, familiarity or due to their historically high returns. A heavy allocation of U.S. stocks tends to be tax-efficient and reduces currency risk.
That being said, there have been extended periods in which the U.S. market has languished. Consider the "Lost Decade" from 1999 to 2009, during which U.S. stocks posted an annualized loss of 0.7%. The cause of this stagnation was three consecutive years of losses after the 2000 dot-com bubble, followed by a catastrophic market crash during the Great Recession.
"International equities are a core component of a globally diversified investment portfolio," says Christine Franquin, principal and senior portfolio manager at Vanguard's Equity Index Group. "Vanguard's recently released 2023 Economic and Market Outlook expects international equities to outperform U.S. stocks over the next decade, largely driven by lower valuations, higher dividend yields and a favorable currency outlook."
A straightforward, low-cost approach to indexing a high-quality portfolio of international stocks is via FSPSX. This fund tracks the MSCI Europe, Australasia and Far East Index, which provides passive exposure to 805 developed market equities from the eurozone and Asia-Pacific regions.
Emerging market equities are shares of companies from countries like Brazil, Russia, India and China. While these stocks can be quite volatile, they often trade at attractive valuations. A low-cost, diversified way to passively invest in these stocks is via VEMAX.
This fund tracks over 5,500 emerging market stocks weighted by market capitalization, with 34.2% of its underlying holdings coming from China, 17.4% from India, and 16.2% from Taiwan. VEMAX charges an expense ratio of 0.14% and has a minimum required investment of $3,000.
Dividend investors can invest globally too. Looking internationally can net some great companies that pay above-average yields. A great ETF to implement this strategy is WDIV, which holds 91 global dividend stocks that have increased or maintained stable dividends for at least 10 consecutive years.
While WDIV has a 20.2% U.S. allocation, the rest is held in top-quality dividend stocks from countries like Canada, Japan, Hong Kong, the U.K., China and Switzerland, all screened for sustainable payout ratios. WDIV charges an expense ratio of 0.4%.
Perhaps the easiest way to access a globally diversified equity portfolio is via VTWAX, which holds both U.S. and international stocks according to the current market cap weightings. As of Dec. 31, 2022, this fund held 9,473 stocks, with a 59% allocation to the U.S. and 41% allocation to international stocks, making it highly diversified.
Order DetailsInternational orders can be entered at any time but will only be eligible for execution during the local market hours for the security. International orders are limited to common stocks with the following order restrictions:
International stocks use a different symbology than domestic stocks. To quote, research, or trade international stocks, enter the stock symbol, followed by a colon (:) and then the two-letter country code for the market you wish to trade in. For example, the company Fiat SPA Torino in Italy would trade under symbol F:IT for its ordinary shares. In Germany, it would trade under symbol FIAT:DE. This symbology can only be used to buy or sell stocks on the international trade ticket.
QuotesReal-time quotes1 are available for international stocks using the Get Quote Tool along the top of Fidelity.com or within your International Stock Trading page. Although the real-time primary market quote is displayed, international orders may execute on the primary exchange, or they may execute on ECNs, ATSs or regional exchanges within the market.
Note: International stocks must be bought and sold in the same market. For example, shares of a stock purchased in Germany could not be sold in France even though the company may trade on one or more exchanges in different markets.
For example, the required board lot size for Canadian stocks trading between $0.10-0.99 CAD is 500 shares. To place an order to buy a Canadian security offered at $0.75 per share, your order quantity would need to be a multiple of 500 (the board lot size); e.g., 500 shares, 1,000 shares, 1,500 shares, and so on.
Currency prices are highly volatile. Price movements for currencies are influenced by, among other things: changing supply-demand relationships; trade, fiscal, monetary, exchange control programs and policies of governments; United States and foreign political and economic events and policies; changes in national and international interest rates and inflation; currency devaluation; and sentiment of the marketplace. None of these factors can be controlled by you or any individual advisor and no assurance can be given that you will not incur losses from such events.
Currency exchange feesIf you choose U.S. dollars as the settlement currency for your international stock trade, a foreign currency exchange fee (in the form of a markup or markdown) based on the size of the currency conversion will be charged when the foreign currency exchange executes.
With international trading, most common stocks and exchange-traded funds (ETFs) listed in Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, and the United Kingdom are available to trade online directly in the local market.
Foreign ordinaries are shares issued by a foreign corporation that trade on a foreign exchange. These shares can be traded in the over-the-counter (OTC) market through a U.S. market maker. Below are characteristics, including specific fee information, related to foreign ordinary share trading.
An ADR is a security that trades in the U.S. and in U.S. dollars, but represents claims to shares of a foreign stock. The ADR is created by a bank that purchases foreign stock and then issues receipts of that company in the U.S. for trading on an exchange or over the counter (OTC) market. 041b061a72