International Stocks To Buy Now
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.
international stocks to buy now
"Our clients see international investing as a greater risk," ignoring any diversification benefits the asset class may provide, says Lewis Altfest, chief executive of Altfest Personal Wealth Management.
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.
And international investing comes with an extra set of challenges, given the array of different countries, and their respective currency, regulatory and political risks. The MSCI emerging-markets benchmark, for instance, comprises 24 countries; the developed market benchmark, 21. On top of that, emerging markets carry greater liquidity risk, meaning it's not always easy to buy or sell securities quickly and efficiently.
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.
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%.
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.
This year, international stocks are struggling even more than the U.S. stock market. The Vanguard Total International Stock Index Fund, which holds nearly 8,000 stocks from around the world, is down about 25% for the year. The S&P 500 index is only down 20%.
Between a looming recession in Europe, the ongoing war in Ukraine, major losses in China's stock market and the lingering effects of the pandemic on the world's supply chain, it's no wonder international assets are struggling right now.
"People invest in different asset classes to create a portfolio...that serves what they're trying to do in their investing journey," Cox says. And international stocks, she adds, are one of the pieces.
International stocks tend to do better than U.S. stocks when the S&P 500 is performing poorly, and they tend to do worse when the S&P 500 is doing well, chartered financial analyst Eric Nelson of Servo Wealth noted in a blog post last year.
Despite their recent lag, between 1971 and 2021, the international stock market outperformed the U.S. stock market 100% of the time when U.S returns were less than 4%, according to BlackRock. When U.S. returns were less than 6%, international stocks outperformed U.S. stocks 94% of the time.
You can easily invest in international assets through a mutual fund or exchange-traded fund (ETF). There are a wide variety of international funds out there, from funds focused on a certain country to funds focused on emerging markets like China and Brazil, to funds focused on a specific region of the world, like Asia Pacific, Europe or Latin America. You can explore Morningstar's list of this year's best international stock funds here.
Ultimately, investors are well-served at Interactive Brokers and Fidelity. Fidelity can give U.S. investors a taste of international markets in an easy-to-digest format, while Interactive Brokers gives you the whole global buffet and the full array of tools to make the most of it. Which one you choose depends on your particular appetite.
An international broker is a brokerage firm that offers U.S. and/or international investors the ability to buy and sell stocks across the globe. To qualify as an international broker for our review, a brokerage firm must be U.S.-based and U.S.-regulated.
Two of the key reasons individual investors usually want to invest in international investments (or investments that offer international exposure) are diversification and the potential for growth, particularly in emerging markets. International exposure has become easier with the variety of exchange-traded funds that cover specific countries, geographic regions, or even sectors spanning multiple regions.
For some investors, however, general exposure is not as profitable as targeting specific stocks only sold in their domestic markets. General exposure to the Japanese market, for example, may be too general if an investor is really looking to target Japanese advanced materials companies. Similarly, a global oil fund washes out regional differences in both the risk and returns that companies face in terms of regulatory compliance, political stability, domestic subsidies, proven reserves, and so on. Investors with a particular fundamental outlook on a market or sector may look to invest directly in that market to test the investment thesis in the purest trade possible. ETFs and other tools can be used as proxies, but they dilute the trade by bundling in other assets outside of the target ones.
There are a few ways individual investors can gain exposure to international markets. For example, you can buy American depositary receipts (ADRs), U.S.-registered mutual funds, or U.S.-registered ETFs that invest in foreign securities. You might be surprised that many large U.S. companies do business overseas and give you access to international consumers. In this case, investing in a multinational stock might be similar to buying an international stock.
Once you have opened and funded an account with an international broker, buying international stocks is similar to buying stocks on U.S. exchanges. You may need to request access (including price data) for the specific exchange(s) you want to trade. Also, you may need to research the exchange and ticker symbol to ensure you are trading the intended stock.
In general, international stocks must be bought and sold on the same exchange (e.g., if you buy stock in France you must sell it there, too). Certain exchanges may have additional requirements. For example, the Tokyo Stock Exchange and Osaka Securities Exchange set daily price limits for all securities to manage volatility. In most cases it is more expensive to buy and sell stocks internationally. The commissions and fees for international trades might differ from those for U.S. stocks and currency exchange fees may apply as well.
When choosing an international broker, look for the same features you would want out of any broker: a strong industry reputation, up-to-date security standards, solid customer service, reasonable costs, robust trading tools, helpful educational content, and access to the markets you want to trade.
Access to research reports, screeners, and international news is very important when choosing an international broker. It might be more important to perform in depth research before buying an international stock than a U.S. company, due to differing legal reporting requirements for international firms.
In most cases, legal U.S. residents who are not U.S. citizens can open U.S.-based brokerage accounts, provided they complete the required paperwork and certify their tax status. You might be required to complete additional tax documents that are required for international citizens.
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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: 041b061a72