It’s a big, big world out there. And, in terms of stocks, there are certainly low-cost index exchange-traded funds (ETFs) out there to help you grab a slice of it.
The decisions facing ETF investors hinge mostly on how you slice it.
Do you want to keep your foreign equities in discrete baskets for the U.S. and everywhere else, or opt for a fund like iShares Core MSCI All Country World ex Canada Index ETF (XAW) or Vanguard FTSE Global All Cap ex Canada Index ETF (VXC) that’ll give you everything in equities except the domestic Canadian market? Are you only looking for developed markets overseas, which usually falls under the acronym EAFE (Europe, Australia and the Far East), or do you want exposure to the more volatile but potentially lucrative emerging markets too?
Given the geopolitical events of 2022 are still fresh in our 2023 perspectives, values outside sheer risk and return may also come into play. Are you okay with having exposure to Russia? What about China? iShares, for example, offers an emerging market ETF sans China (EMXC).
If you want to go deep into an ETF’s ethics, there are funds like the U.S.-listed Freedom 100 Emerging Markets ETF (FRDM) that require countries included to meet a standard on a list of personal freedoms.
Just one International Equity ETF won the favour of all seven of our panellists: Vanguard FTSE Global All Cap ex Canada Index ETF (VXC). This fund consolidates all of your foreign equity holdings—American, international and emerging—into one investment for a very reasonable MER of 22 basis points (0.22%).
If you prefer to manage your allocation to the U.S. versus other developed markets separately, VXC may not be right for you, given a 61% exposure to U.S. stocks. As an alternative, there’s iShares Core MSCI EAFE IMI Index ETF (XEF), which covers the Europe, Australasia, and Far East (EAFE) region for the same fee. It too comes highly rated by our panel.
In the international section, XEF was mentioned as highly rated by the panel, but not VIU, which has been featured in previous years if I’m not mistaken. Is there any reason not to include VIU this year? Thanks
Good question Erwin. I also wonder why ZEA did not get a mention.