Home stock market bias remains strong in the United States, but more investors opened portfolios to international equities last year. Roughly $150 billion went into international exchange-traded funds in 2017, compared to just $16 billion the year before. Investors who diversified overseas were rewarded with performance in both developed markets ex-U.S. and emerging markets that rivaled returns from the Dow and S&P 500. The MSCI All Country World Index finished last year up about 21.5 percent, outperforming the S&P 500's 19 percent return, according to S&P Capital IQ data.
With the backdrop for global growth continuing to be positive — with relatively low interest rates and strong consumer confidence — the case for global equities remains strong, in particular for investors yet to make the move at all. So far, the All Country World Index has outperformed the S&P 500 in January by more than one percentage point and, if the experts are right — Goldman Sachs and JP Morgan research predicts greater gains for emerging markets than the S&P 500 in 2018 — global stocks could again beat the U.S. market. Even if the performance doesn't match last year's torrid pace, international stock diversification helps.
One of the easiest ways to own global stocks is through ETFs, which are inexpensive, broadly diversified and easy to buy and sell.
"Rather than finding the best ideas yourself or paying a premium to someone else to potentially find the best stocks, you can use an ETF to cover the globe extremely inexpensively," said Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA Research.
They are also more tax efficient than mutual funds because turnover is low, creating fewer taxable events, like the triggering of capital gains.