Wrapping your head around international investing can be overwhelming.
And if you are relatively new to investing, you might have read about the importance of diversification between different stock market sectors.
As well as diversifying between sectors, you can also diversify your portfolio by adding quality companies from international markets.
For example, investors with holdings in blue-chip stocks like Apple or Amazon enjoyed massive returns in 2024.
But how do we get our hands on these quality holdings?
One way is to buy ASX exchange-traded funds (ETFs), which provide exposure to multiple companies at once.
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Why not just stick to Australian stocks?
Using a brokerage account you can buy and sell units in an ASX ETF the same way you purchase individual shares.
This gives you access to global markets without needing foreign brokerage accounts.
It also helps diversify your portfolio.
But why is this important?
Historically, the S&P/ASX 200 Index (ASX: XJO) has generated average total returns of 10% per annum.
However, this doesn't mean it simply rises 10% every year. Some years it might drop (like in 2022), while others might see strong growth (like in 2019).
If the Australian market struggles, or has a down year, other markets overseas might perform better during the same period, offsetting some of your losses.
Furthermore, some of the ASX 200's largest constituents are banking and mining companies like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).
This means the ASX 200 can be heavily influenced by how these sectors perform.
Meanwhile, overseas markets like the S&P 500 Index (SP: INX) can be more influenced by different sectors, such as technology.
If you are looking to diversify your portfolio, here are three international ETFs on the ASX that have historically provided strong returns.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
The Vanguard MSCI Index International Shares ETF (ASX: VGS) invests in companies from around 23 different countries, including the US, Japan, the UK, Canada, France, and Switzerland.
Additionally, it excludes Australian companies, which means if you've already bought ASX-listed shares, you won't be doubling up on shares you already hold.
The ETF provides exposure to approximately 1,500 of the world's largest companies listed in major developed countries.
Over the past five years, VGS has risen 65%, and since its opening in 2014, it has risen by 174.18%.
Its largest holdings include:
- Apple: 5.10% of net assets
- Nvidia: 4.79% of net assets
- Microsoft: 4.23% of net assets
iShares Global 100 ETF (ASX: IOO)
The iShares Global 100 ETF could be ideal for investors looking for an international ETF with a much higher focus on the US market.
This ETF is designed to track the performance of an index comprising 100 multinational, blue-chip companies of major importance in global equity markets.
Over the past 5 years, the IOO ETF has risen 100.10% and it has risen 337.86% since 2009.
It has the same largest three holdings as VGS, however they are weighted much higher in this ETF.
- Apple: 12.43% of net assets
- Nvidia: 11.57% of net assets
- Microsoft: 10.81% of net assets
iShares Asia 50 ETF (ASX: IAA)
The iShares Asia 50 ETF (ASX: IAA) is another option for investors aiming to diversify away from just Australian holdings.
IAA seeks to track the returns of the S&P Asia 50 Index. In other words, the 50 largest listed companies in Asia.
Unlike the other two ETFs listed, IAA has provided modest growth over the past five years, rising only 7.82% during this time.
However, it has grown almost 140% since its initial listing in 2008.
Its largest holding is Taiwan Semiconductor Manufacturing Co Ltd with a 27.23% weighting.
