Why International Markets Are Attracting Attention Right Now
Across the globe, major stock indices that track companies outside the United States are trading at a noticeable discount compared to their U.S. counterparts. When a market is priced lower than another, it can signal a window of opportunity for investors who want exposure to that region without picking individual names.
Another factor that makes international equities appealing is the dividend yield. The MSCI EAFE index, which represents developed markets outside North America, offers a yield of 3.4% as of the latest data. In contrast, the S&P 500, a benchmark for U.S. large‑cap stocks, sits around 1.5%. That gap means investors can potentially earn more income from international shares without moving their money into a different asset class.
Because of these dynamics, many professionals recommend looking at exchange‑traded funds (ETFs) that provide broad exposure to international markets. ETFs bundle a basket of stocks into a single security that can be traded like a share, giving investors instant diversification across countries and sectors.
What Makes an International ETF a Good Choice?
International ETFs are designed to mirror the performance of a specific index or set of indices. They typically carry lower costs than buying a portfolio of individual foreign stocks. They also offer liquidity, meaning investors can buy or sell shares throughout the trading day at market prices.
For those who want a hands‑off way to invest abroad, an ETF can be a practical solution. Instead of dealing with foreign brokerage accounts, currency conversions, and local tax rules, a domestic ETF delivers the same exposure with the convenience of a single trade.
The Discount to U.S. Indices Explained
A discount between international and U.S. indices can arise for several reasons. Currency movements, differences in economic growth, or variations in investor sentiment may cause one market to trade lower than another. When the discount is large, it can hint that the foreign market is undervalued relative to the U.S. market.
Investors who track these discounts often look for a convergence, where the gap narrows over time. If the discount is driven by temporary factors, the value of the foreign market may rise as those factors fade. That potential upside is part of why some analysts highlight international ETFs as attractive for the coming years.
Dividend Yields: Income from Global Shares
Dividend yield is calculated by dividing a company's annual dividend payment by its share price. When an index has a higher yield, the average of its constituent companies pays out more relative to their price. The MSCI EAFE’s 3.4% yield suggests that, on average, investors in that index receive more cash back each year than those holding the S&P 500.
Higher yields can be appealing for income‑focused investors or those looking for a cushion against market volatility. They also provide a source of cash that can be reinvested or used for other purposes.
Schwab International Equity ETF: A Closer Look
Schwab International Equity ETF is one of the many funds that give access to foreign markets. It tracks a broad index of companies outside the United States, offering exposure to a variety of developed economies.
While the fund is not listed among the 10 best stocks identified by a well‑known analyst team, that does not automatically rule it out as a solid addition to a portfolio. The fund’s structure, expense ratio, and track record can still make it a valuable vehicle for international exposure.
"The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab International Equity ETF wasn’t one of them."
Why Schwab International Equity ETF Might Shine in 2026
There are several reasons why this ETF could become a leading choice for investors by 2026:
- Broad Coverage: The fund holds a wide range of companies across multiple developed markets, reducing the risk that any single country’s performance will dominate the return.
- Cost Efficiency: ETFs typically have lower expense ratios than actively managed funds, which can translate into higher net returns over time.
- Dividend Potential: With many of its holdings in companies that pay regular dividends, the fund can offer a higher yield than a U.S.‑centric index.
- Liquidity: The fund is traded on major exchanges, allowing investors to enter or exit positions quickly and at transparent prices.
Because the international market is currently trading at a discount, the fund could benefit from a price correction that brings its value closer to that of comparable U.S. indices. If the discount narrows, the fund’s performance may improve relative to domestic peers.
Risks to Keep in Mind
Investing in foreign markets is not without challenges. Currency fluctuations can affect the value of the fund’s holdings when expressed in U.S. dollars. Economic changes, political events, or regulatory shifts in the countries the fund covers can also impact performance.
Additionally, while the fund offers diversification, it still carries market risk. A downturn in global equities can reduce the fund’s value, just as it would for any equity investment.
How to Add Schwab International Equity ETF to Your Portfolio
1. Open a Brokerage Account: Choose a platform that offers access to the ETF and provides tools for research and portfolio tracking.
2. Determine Your Allocation: Decide what percentage of your total portfolio you want to dedicate to international exposure. A common approach is to match the allocation of your domestic equity holdings.
3. Place an Order: Use a market or limit order to buy shares of the ETF at the price you prefer.
4. Monitor Performance: Keep an eye on the fund’s price movements, dividend payouts, and any changes in its holdings or expense ratio.
5. Rebalance Periodically: As market conditions shift, you may need to adjust your holdings to maintain your target allocation.
Looking Ahead to 2026
With international indices trading at a discount and offering higher dividend yields, the case for international ETFs strengthens. Schwab International Equity ETF, with its broad exposure and cost advantages, could be a key component of a portfolio that seeks growth and income from global markets.
While no investment is guaranteed, the combination of discount pricing, dividend income, and diversification makes this ETF a candidate for investors who want to position themselves for potential gains in the next few years.
Overall, the current market environment presents a compelling scenario for international equity exposure. By adding a well‑structured ETF to a diversified strategy, investors can tap into the upside of global markets while managing risk through broad coverage and lower costs.
