One concept that has proven effective time and time again is the importance of diversification. You should want companies in different industries, of different sizes, and in different geographic locations. Since the United States is home to so many world-class companies, the latter can sometimes go unnoticed.
A truly diversified portfolio should include international stocks, even if it’s just a small portion. That’s why he Schwab International Stock ETF (NYSEMKT: SCHF) It can be an excellent addition to the buy-and-hold portfolio for those who want exposure to international companies.
The Schwab International Equity ETF is an exchange-traded fund containing approximately 1,500 large- and mid-cap stocks from international developed markets. Developed markets are those with stable economies, mature financial markets, and (relatively) stable political environments. This is different from emerging markets, which are generally considered to be moving toward those same standards, but have not yet done so (e.g., China, India, and Brazil).
Below are the 10 countries most represented in this Schwab ETF:
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Japan: 21.28%
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United Kingdom: 12.26%
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Canada: 10.76%
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France: 8.50%
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Germany: 7.78%
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Swiss: 7.56%
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Australia: 6.16%
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South Korea: 4.58%
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Netherlands: 3.83%
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Spain: 2.93%
The other approximately 15% of the ETF is distributed among other countries that have less than 1% representation.
The ETF’s best-known companies include Samsung (1.33% of the ETF), HSBC (1.04%), Be protected (0.99%), toyota (0.89%), and buy (0.78%).
When you invest in SCHF, you should not expect consistent market-beating returns (compared to the S&P 500). It is rather a hedge against the US economy, protecting you when the US economy is in a downturn or when US stocks become expensive.
An example of the latter can be seen this year. With valuations of artificial intelligence (AI) and technology stocks rising in recent years, the S&P 500 has reached historically high levels, causing many investors to look outside the United States for cheaper, better-valued investment opportunities.
Through December 22, the Schwab International Equity ETF had far outperformed the S&P 500, up nearly 29% compared to 16%.