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Growth & Income: Two Funds for Global Exposure

04/16/2019 5:00 am EST

Focus: FUNDS

Jim Woods

Editor, Successful Investing and Intelligence Report

Our proprietary timing system has now given us the green light to add broad-based international equity ETFs to our portfolios in accordance with the main focus of each of those portfolios, asserts Jim Woods, editor of Successful Investing.

for the Income Portfolio, we want to add international exposure that is focused on dividend yield. In the Growth Portfolio, we want to focus on the higher-beta, growth-style equities which deliver higher share-price appreciation but are not primarily concerned with dividend yield.

Of course, there are many ETFs to choose from on both of these lists, and you really can’t go wrong with any of the high-profile, broad-based international dividend funds or the top broad-based international growth funds.

Yet, we have to choose only one for each portfolio today, especially given we are nearly already fully invested in both the Income and Growth Portfolios. I recommend you make the following fund allocations:

Income: Buy the Vanguard International High Dividend Yield ETF (VYMI), at market, with a 10% Income Portfolio allocation.

Growth: Buy the iShares Core MSCI Total International Stock ETF (IXUS), at market, with a 10% Growth Portfolio allocation.

I am very excited about these two funds, as I think both are great fits for our respective portfolios.

The Vanguard International High Dividend Yield ETF is a well-diversified fund, which screens for high-yielding stocks and then weights them by their market capitalization. This approach emphasizes larger companies that have a track record of strong dividend payouts.

The fund is basically a way to get exposure to some of the best high-yield international equities without having to dig into the individual balance sheets or foreign companies yourself. Believe me, that’s no easy task. Having done exactly that in a former life, it’s a full-time gig you probably don’t want.

The fund has an expense ratio of just 0.32%, an annual dividend yield of 4.08% and has a four-star Morningstar rating. The fund’s total return so far in 2019 is 11.29%. Over the past three years, its total return has been 9.06%.

The iShares Core MSCI Total International Stock ETF gives us exposure to one of the broadest portfolios in the international fund category all at an ultra-low expense ratio. The fund tracks the MSCI ACWI ex USA Investable Market Index, which targets stocks of all sizes from more than 40 overseas developed and emerging markets.

IXUS has a minuscule expense ratio of just 0.10%, an annual dividend yield of 2.72% and has a four-star Morningstar rating. The fund’s total return so far in 2019 is 12.48%. Over the past three years, its total return is 9.36%.

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