Hey guys! Are you looking to diversify your investment portfolio beyond the U.S. market? Investing in international ETFs (Exchange Traded Funds) can be a smart move. If you're using Fidelity as your brokerage, you're in luck! Fidelity offers a wide range of international ETFs, and we're here to help you navigate them.

Why Invest in International ETFs?

Before diving into specific ETFs, let's talk about why you might want to consider international exposure. Diversification is the name of the game. By investing in companies from different countries, you can reduce your portfolio's risk. If the U.S. market takes a hit, your international investments might help cushion the blow. Moreover, international markets often have growth opportunities that you might miss by sticking solely to domestic investments. Emerging markets, in particular, can offer significant potential returns, although they also come with higher risks. Another compelling reason is to gain exposure to different sectors and industries that might be underrepresented in the U.S. market. For instance, some countries may have a stronger focus on technology, manufacturing, or renewable energy. Investing internationally allows you to tap into these specialized areas and benefit from their growth. Keep in mind, though, that international investing also comes with its own set of challenges, such as currency risk and political instability. So, it's crucial to do your homework and understand the specific risks associated with each market before investing.

Factors to Consider When Choosing an International ETF

Choosing the right international ETF involves considering several key factors. First and foremost, expense ratio matters. This is the annual fee charged by the ETF to manage the fund. Lower expense ratios mean more of your investment returns stay in your pocket. Keep an eye out for ETFs with expense ratios below 0.20% – these are generally considered quite competitive. Next, take a close look at the index the ETF tracks. Different indexes focus on different regions, countries, or market segments. Make sure the index aligns with your investment goals and risk tolerance. For example, an ETF tracking the MSCI EAFE index will give you exposure to developed markets in Europe, Australasia, and the Far East, excluding the U.S. and Canada. Another crucial factor is the ETF's holdings. Understand what companies are included in the ETF's portfolio and how heavily each is weighted. This will give you a better sense of the ETF's overall exposure and potential risks. Also, consider the ETF's trading volume and liquidity. Higher trading volumes generally mean tighter bid-ask spreads and easier execution of trades. Finally, pay attention to the ETF's tracking error. This measures how closely the ETF's performance matches the performance of its underlying index. Lower tracking error is generally desirable, as it indicates the ETF is doing a good job of replicating the index's returns. Don't forget to review the ETF's fact sheet and prospectus for detailed information about its investment strategy, risks, and fees.

Popular International ETFs Available on Fidelity

Okay, let's get down to business and explore some popular international ETFs you can find on Fidelity! One of the most common choices is the Vanguard FTSE Developed Markets ETF (VEA). This ETF offers broad exposure to developed markets outside of the U.S. and Canada. It's known for its low expense ratio and diversified holdings. Another solid option is the iShares Core MSCI EAFE ETF (IEFA). Similar to VEA, IEFA tracks the MSCI EAFE index and provides access to a wide range of developed market companies. If you're specifically interested in emerging markets, the Vanguard FTSE Emerging Markets ETF (VWO) is a great pick. VWO invests in companies located in emerging market countries like China, India, and Brazil. Keep in mind that emerging markets tend to be more volatile than developed markets, so this ETF is better suited for investors with a higher risk tolerance. For those looking for a more targeted approach, the iShares MSCI EAFE Small-Cap ETF (SCZ) focuses on small-cap companies in developed markets outside of the U.S. and Canada. Small-cap stocks can offer higher growth potential, but they also come with increased risk. Finally, if you're seeking dividend income from international stocks, the Schwab International Dividend Equity ETF (SCHY) could be a good fit. SCHY invests in high-dividend-yielding companies in developed and emerging markets, providing a stream of income in addition to potential capital appreciation. Remember to always conduct thorough research and consider your own investment objectives before investing in any ETF.

How to Buy International ETFs on Fidelity

Buying international ETFs on Fidelity is a straightforward process. First, you'll need to open an account with Fidelity if you don't already have one. You can do this online in just a few minutes. Once your account is set up, you'll need to fund it with cash. You can transfer funds electronically from your bank account or deposit a check. Next, log in to your Fidelity account and navigate to the trade section. Here, you can enter the ticker symbol of the international ETF you want to buy (e.g., VEA, IEFA, VWO). Specify the number of shares you want to purchase and choose your order type (e.g., market order, limit order). A market order will execute your trade immediately at the current market price, while a limit order allows you to set a specific price at which you're willing to buy. Review your order carefully before submitting it to ensure everything is correct. Once your order is executed, the ETF shares will be added to your portfolio. You can then track your investment performance and manage your holdings through your Fidelity account. Fidelity also offers a range of research tools and resources to help you make informed investment decisions, including ETF screeners, analyst reports, and educational articles. Take advantage of these resources to stay informed and make the most of your international ETF investments. And remember, diversification is key – don't put all your eggs in one basket!

Risks of Investing in International ETFs

Investing in international ETFs comes with its own unique set of risks that you should be aware of. Currency risk is a big one. When you invest in foreign companies, your returns can be affected by fluctuations in exchange rates. If the U.S. dollar strengthens against the foreign currency, your investment returns may be reduced when converted back to dollars. Political risk is another important consideration. Political instability, changes in government policies, and regulatory uncertainties can all impact the performance of international investments. Emerging markets, in particular, tend to be more susceptible to political risk. Economic risk is also a factor. Economic downturns, recessions, and inflationary pressures in foreign countries can negatively affect the performance of companies located in those countries. Additionally, different accounting standards and reporting requirements in foreign countries can make it more challenging to assess the financial health of companies. Another risk to be aware of is geopolitical risk. Events such as wars, conflicts, and trade disputes can have a significant impact on international markets. It's important to stay informed about global events and understand how they might affect your investments. Finally, liquidity risk can be a concern, especially for ETFs that invest in smaller or less developed markets. These ETFs may have lower trading volumes, which can make it more difficult to buy or sell shares at a desired price. Always weigh these risks carefully and consider your own risk tolerance before investing in international ETFs. Diversification can help mitigate some of these risks, but it's not a guarantee against losses.

Conclusion

So, there you have it! Investing in international ETFs through Fidelity can be a great way to diversify your portfolio and tap into growth opportunities around the world. Remember to consider factors like expense ratio, index, holdings, and risks before making any investment decisions. With a little research and careful planning, you can build a well-diversified international portfolio that aligns with your investment goals. Happy investing, and good luck!