Global ETFs: Why Going Outside Our Borders Could Pay Off Handsomely

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Us investors in the United States have become jaded. There are many versions of how to illustrate that, but the one I’ll focus on here is the belief that the US stock market is always a perennial performance juggernaut. I believe the world stock markets have a lot to offer. And I’m going there with my money, writes Robert Isbitts, founder of ETFYourself.com.

I suspect a small portion of the investor population based in the US realizes that even during the recent strong performance of the US market (by historical standards), to assume that is where all the returns are to be had, this far into the market cycle, is simply a mistake.

That’s why I am pointing it out briefly here. And I’m doing so for the best reason anyone could expect: Because I think global markets are where some of the best returns will be in the coming years, regardless of how well the US stock market performs.

One important measuring stick to me is how an investment has done since the start of 2022. That 27-month period has seen the S&P 500 and Nasdaq drop by 25% and 33% respectively, then mount a furious comeback -- just to break even -- until the late-2023/early-2024 run-up.

I recently asked some investors I’ve known for a long time what they thought the total return of the Invesco QQQ Trust (QQQ) was since the start of 2022. They were as shocked as most would be when I told them it was 9%. Not 9% a year. Nine percent total, including dividends, over 27 months.

For the S&P 500 ETF Trust (SPY), it is 12%, and if we use the equal-weight S&P 500, it is 5%. The average stock among the largest 1,000 US stocks – as tracked by the Invesco Russell 1000 Equal Weight ETF (EQAL) – has a 27-month return of -0.66%. I feel like there should be an extra six there, since the devil is in the details.

What do single-country ETFs do for US and non-US investors? I track more than 70 different ones on my screen every day, and what they offer is literally a world of diverse investment return patterns. And that is what every investor wants. A baseball pitcher can’t get too far with only one pitch, and an investor should also have as many “tools” in their research shed as they can.

Quick facts to consider: During that period cited above, Jan. 1, 2022 through April 10, 2024, when the average US stock (1,000 of them) was underwater, more than half the foreign country stock markets I track via ETFs performed better. And about 40% of them outperformed SPY.

What’s just as important? All of the country ETFs that underperformed now sell at microscopic valuations compared to US large-cap stocks. But the “home country bias” is so strong, I wonder if many investors will ever realize just how much diversification benefit, and likely long-term return enhancement, there is to be had in this genre of investing.


About the Author

Robert Isbitts is the founder of ETYourself.com and a serial investment myth-buster, as well as an educator. He applies his more than 30 years of hands-on investing experience to dissect the market, bust common myths, and simplify the investment process for his audience. Mr. Isbitts is an active contributor at etf.com and Seeking Alpha. He is a former investment advisor and fund manager.


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