In this article, we discuss 9 Best International Index Funds to Invest In.
Undoubtedly, the US plays host to the largest equity market in the world as home to the largest stock exchanges. Likewise, it is home to the largest companies in the world by market capitalization. Therefore, investors often turn to the US, given the high liquidity always in play when seeking exposure to some of the biggest and emerging market segments.
Over the years, US indices have provided broad exposure to various sectors, from financial services to healthcare, technology, industrials, and even consumer cyclical. However, amid the escalating tariff and trade war pitting the US and its allies or other economies, sentiments in the equity markets are increasingly shifting.
Major US equities and indices have pulled back significantly from record highs after President Donald Trump imposed significant trade tariffs on Canada, China, the EU, and other nations. In the year’s first quarter, the US S&P 500 was down by about 6% as the tech-heavy Nasdaq 100 slid more than 8.1%. The slump came as investors became net sellers concerned by the impact of the trade war waged by the Trump administration.
In contrast, European equities were on a roll, with the EURO STOXX 50 index tracking the 50 largest blue chip stocks in the trading block, soaring 11%. The rally in European equities underscores how the focus is increasingly shifting away from US equities to other markets.
“The first months of 2025 have shown increased investor focus on international investing, with developed markets strongly outperforming their U.S. counterparts,” says Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group.
This superior performance has been fueled by a shift towards international equities, primarily linked to the Trump administration’s growing isolationist stance. A mix of diminished backing for Ukraine and tariffs imposed on crucial trading allies such as Canada has led to a reevaluation of the stability of the U.S. market, which has long been a fundamental aspect of investor trust.
In addition to policy issues, valuations have also influenced this trend. For many years, U.S. stocks have been priced at considerably higher forward price-to-earnings (P/E) ratios than their international counterparts. Now, as those multiples shrink, investors are rethinking their investment strategies.
Likewise, the best international index funds offer a way out of the turmoil in the US equity markets as they offer broad market exposure to some of the biggest companies at some of the lowest costs.
“Adding international stocks to your portfolio can dampen volatility and improve returns, since the U.S. economy and market may face challenges at different times compared to international regions,” says Scott Klimo, chief investment officer at Saturna Capital. “Mitigating currency risk also plays a role, as the U.S. dollar may strengthen or weaken versus other countries at different times.”
Consequently, we have listed some of the best international index funds for investors right now.
Our Methodology
To make the list of 9 Best International Index Funds to Invest In, we scanned the global equity markets. We then settled on the best funds based on a number of factors including market index cost (expense ratio) and long-term performance. Finally, we ranked the index funds in ascending order based on the fund’s expense ratio.
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9 Best International Index Funds to Invest In
9. WisdomTree Japan Hedged SmallCap Equity Fund (NASDAQ:DXJS)
5-Year Total Return: 18.37%
Expense Ratio: 0.580%
WisdomTree Japan Hedged SmallCap Equity Fund (NASDAQ:DXJS) is an index fund that invests at least 80% of its assets in small-cap stocks listed on the Tokyo Stock Exchange. Additionally, the fund seeks to neutralize exposure to fluctuations of the Japanese Yen relative to the US dollar. Consequently, it delivers higher returns than equivalent non-currency hedged investments whenever the Yen weakens against the dollar.
WisdomTree Japan Hedged SmallCap Equity Fund (NASDAQ:DXJS) is a highly diversified small-cap-focused index fund. Industrials stocks account for 23.73% of its total holdings, with Consumer Cyclical at 19.00% and Financial Services at 18.34%. The international index fund has an expense ratio of 0.480% and a 3.27% 12-month yield. It stands out as one of the best international index funds going by its five-year average return of 18.37%.
8. Invesco International Dividend Achievers ETF (NASDAQ:PID)
5-Year Total Return: 13.89%
Expense Ratio: 0.530%
Invesco International Dividend Achievers ETF (NASDAQ:PID) is an international index fund targeting investors who are eyeing exposure to some of the top global depository receipts listed on the London Stock Exchange and American depository receipts. The index fund does not include any US or ordinary stocks. Communication services sector stocks account for 19% of the fund’s holdings, followed by utility stocks at 14.58% and energy stocks at 13.89%.
With a 3.68% 12-month yield, Invesco International Dividend Achievers ETF boasts one of the lowest expense ratios at 0.530%. Its 5-year average return stands at 13.89%
7. Xtrackers MSCI EAFE Hedged Equity ETF (NYSEARCA:DBEF)
5-Year Total Return: 14.08%
Expense Ratio: 0.350%
Xtrackers MSCI EAFE Hedged Equity ETF (NYSEARCA:DBEF) is a low-cost index fund that seeks results that correspond to the MSCI EAFE US Dollar Hedged Index, which measures the equity market performance of developed markets outside the US and Canada. The index fund mostly focuses on investment holdings in Europe, Australasia, and the Far East.
Xtrackers MSCI EAFE Hedged Equity ETF relies on a passive or indexing investment approach while tracking developed market performance and mitigating exposure to fluctuations between the U.S. dollar’s value and the countries’ currencies. With a low expense ratio of 0.350%, the fund boasts a 1.24% 12-month yield. It has also generated an average of 14.08% over the past five years.
