Is Diversifying into International Stocks in 2025 a Game Changer?

In the world of investing, the year 2025 is shaping up to be a pivotal moment for those with a keen eye on international markets. With U.S. stocks, especially large-cap ones, having shown remarkable performance over the past decade, it’s prudent to ponder whether 2025 signifies the right time to broaden investment horizons. According to The Motley Fool, diversifying investments beyond U.S. borders might be the key to capturing higher returns.

The Rise of International Equities

This year, international equities are outpacing their U.S. counterparts, with returns that deserve the attention of savvy investors. While the S&P 500 has basked in a 15.3% annualized return over ten years, recent figures indicate the MSCI World Index’s 25.3% surge in the first three quarters of 2025 surpasses the S&P 500’s 14.8%. Investing in international stocks isn’t merely a tactical move—it’s a strategic necessity for diversification.

Vanguard Total International Stock ETF: A Global Approach

For investors eyeing international markets, the Vanguard Total International Stock ETF (VXUS) offers an extensive reach. Tracking the FTSE Global All Cap ex US Index, this ETF encompasses over 8,700 stocks across Europe, the Pacific, and emerging markets. Despite recent shifts, its expansive geographical spread ensures that investors enjoy robust diversification.

Vanguard FTSE Europe ETF: Spotlight on Europe

Europe remains a focal point with the Vanguard FTSE Europe ETF (VGK), which promises a comprehensive stake in prominent European markets. The ETF’s portfolio spans the United Kingdom, France, and Germany, lending significant weight to these economic powerhouses. With the ETF returning 28.5% year-to-date, it underscores Europe’s potential as an investment haven.

iShares Core MSCI EAFE ETF: Asia and the Far East Beckons

For those drawn to the vibrant markets of Asia and the Far East, the iShares Core MSCI EAFE ETF (IEFA) stands as a compelling option. With a notable exposure to Japan and the United Kingdom, it navigates the dynamic terrains of financials, industrials, and healthcare sectors. The ETF’s 26.5% return this year highlights its strategic clout in developed international markets.

Investing for the Future

The year 2025 could be remembered as a turning point for international stock investment. As markets favor diversification, these three ETFs present intriguing possibilities. For investors poised to explore beyond domestic boundaries, this year marks not just an opportunity but a potential watershed in realizing rich returns.

Embrace the change, and consider whether expanding into international equities aligns with your investment goals this year. The world of investing is ever-evolving; staying informed and adaptable is the mark of the astute investor.