Skip to Content

The Best International Stock Index Funds

Excellent choices abound in five investment categories.

Illustrative photograph of John Rekenthaler, Vice President of Research for Morningstar.
Securities In This Article
Fidelity Global ex US Index
iShares Currency Hdgd MSCI EAFE SmCp ETF
iShares Core S&P US Value ETF
iShares Currency Hdgd MSCI ACWI exUS ETF

Round 2

This column continues the theme of last week’s article, “The Best US Stock Index Funds.” (You probably figured that from the headline.)

Once again, the goal is to identify the leading equity index funds that are widely available. The candidate list thus includes retail mutual funds and all exchange-traded funds while excluding both institutional funds and investments that distribute only through certain channels, such as 401(k) plans or financial advisors.

Adapting the Approach

The US article considered tracking error, the difference between the fund’s returns after adjusting for its expenses and the returns of the index that it emulated. This article will not do so, because international stock funds have two pricing policies. Some funds value their investments by the price of their most recent trades, at the exchange rate then prevailing, while other funds update such information through a process called “fair value pricing.” The exercise is therefore moot.

Nor can investors readily compare fund performances. Whereas 134 index funds claim the S&P 500 as their primary benchmark, almost every fund cited in this article claims a distinct standard. The upshot: If Fund A has outgained Fund B by an annualized 15 basis points over the past five years, despite costing slightly more, is that because Fund B has less adeptly replicated its benchmark? Or is it because Fund A’s index has enjoyed higher returns? If the latter, will things stay that way?

This column avoids such questions. It cannot answer the first question because of the inconsistency of pricing methods among international stock index funds. With some effort I could address the second question, but there is little point in doing so without also being able to resolve the third. It’s one thing to know what happened in the past, but quite another to determine whether that pattern will continue.

Today’s Format

Thus, my winners’ list contents itself with identifying the lowest-cost retail funds (with a maximum expense ratio of 0.50%) that have existed for at least five years, displayed in order of their costs. Also presented are their underlying indexes and five-year total returns, for those wishing to investigate further. They are grouped according to five investment goals:

1) Total international, which includes emerging markets but not US equities.

2) Developed markets, which excludes each of the above regions.

3) Global equities, which invests throughout the world, including in the US.

4) Emerging markets

5) Small company, which excludes the US but may or may not include emerging markets.

I selected only broadly defined funds. These days, many index funds specialize. They may hold only growth or value funds; invest through environmental, social, and governance principles; apply leverage; or hedge their positions. All fine, but not for this column.

Best Total International Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
Fidelity ZERO International IndexFZILXFidelity Global ex US7.400.00
Fidelity Global ex US IndexFSGGXMSCI ACWI IMI ex USA7.200.06
iShares Core MSCI Total International Stock ETFIXUSMSCI ACWI IMI ex USA7.290.07
Vanguard FTSE All-World ex US ETFVEUFTSE All-World ex US7,450.07
Vanguard Total International Stock ETFVXUSFTSE Global All Cap ex US7.390.08

In the early 2000s, Fidelity started an index fund price war in an attempt to wrest business from Vanguard. While the latter still dominates, Fidelity has accumulated $1.3 trillion in index fund assets, an impressive feat for a company that once symbolized active management. Nowhere are Fidelity’s efforts more visible than with total international stock indexes. The company offers the two cheapest retail funds, including no-cost Fidelity Zero International Index FZILX.

Best Developed-Markets Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
SPDR Portfolio Developed World ex US ETFSPDWS&P Developed Markets ex US BMI8.220.03
Fidelity International IndexFSPSXMSCI EAFE8.340.04
iShares Core MSCI Intl Developed Markets ETFIDEVMSCI World ex USA IMI8.510.04
Vanguard FTSE Developed Markets ETFVEAFTSE Developed Markets ex US All Cap8.400.05
Schwab International Equity ETFSCHFFTSE Developed Markets ex US8.520.06

Thanks to China’s struggles, these funds have bested their predecessors by slightly more than 1 percentage point per year. Note also that Fidelity International Index FSPFX appears here, while the seemingly identical (except for its expense ratio) Fidelity Zero International Index was in the previous table. That is because the funds have different objectives. Fidelity International Index invests only in developed markets, while Fidelity Zero International Index also holds emerging-markets stocks. Confused? That makes two of us.

Best Global Stock Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
Vanguard Total World Stock ETFVTFTSE Global All Cap11.840.07
SPDR Portfolio MSCI Global Stock Market ETFSPGMMSCI ACWI IMI12.040.09
iShares MSCI World ETFURTHMSCI World13.030.24

These funds possess relatively few assets. Most US shareholders prefer a larger helping of their home country’s securities than are held by global-stock benchmarks. They create their own domestic/foreign blends rather than leave that decision to index providers. Consequently, there aren’t many great options. Vanguard and State Street STT run the only two truly cheap funds of the bunch, with iShares managing two midpriced offerings. (Quiz: Can you guess why iShares’ MSCI World ETF URTH has outgained its sibling iShares MSCI ACWI ETF ACWI? Correct. The latter holds emerging-markets stocks, while the former does not.)

Best Emerging-Markets Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
SPDR Portfolio Emerging Markets ETFSPEMS&P Emerging Markets BMI4.740.07
Fidelity Emerging Markets IndexFPADXMSCI Emerging Markets3.410.08
Vanguard FTSE Emerging Markets ETFVWOFTSE Emerging AC China A Included4.730.08
iShares Core MSCI Emerging Markets ETFIEMGMSCI Emerging Markets IMI4.240.09
Schwab Emerging Markets Equity ETFSCHEFTSE Emerging Markets4.110.11

The field expands, with five companies providing low-cost investments. The performance range is wide, as 133 basis points separate the top and bottom performers. The disparity is unsurprising, as the benchmark for SPDR Portfolio Emerging Markets ETF SPEM contains 4,105 more companies (!) than that for Fidelity Emerging Markets Index FPADX. The names of the two funds resemble each other much more than do the indexes.

Best Small Company Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
Vanguard FTSE All-World ex US Small Cap ETFVSSFTSE Global Small Cap ex-US6.900.08
Schwab International Small-Cap Equity ETFSCHCFTSE Developed Markets Small Cap ex-US Liquid6.450.11
SPDR S&P International Small Cap ETFGWXS&P Developed Markets ex-US Under USD2 Billion5.540.40
iShares MSCI EAFE Small-Cap ETFSCZMSCI EAFE Small Cap6.470.40

With this list, I confess defeat. Three funds invest solely in developed markets, while Vanguard FTSE All-World ex US Small Cap ETF VSS also holds emerging markets. Logically, then, they should have outgained Vanguard’s offering, since (as we have seen) emerging-markets stocks have lagged those from developed markets. They did not, and I have no explanation. The anomaly does point out, though, that cost advantages are more tenuous with these investments than with the others, because the index characteristics vary so widely.

My final table contains funds that protect against currency risk by hedging their returns into US dollars. Over the past five years, such funds have reliably outgained their local-currency peers. Of course, the US dollar’s strength may wane. If so, these past winners would become future losers. That said, for those seeking to tie their fortunes to those of the US dollar, here are three iShares funds that accomplish the task.

Best Hedged Funds

(Annualized Total Return %, January 2019-December 2023)

Return %
Expense %
iShares Currency Hedged MSCI ACWI ex-US ETFTotal InternationalHAWXMSCI ACWI ex US 100% Hedged9.680.35
iShares Currency Hedged MSCI EAFE ETFDeveloped MarketsHEFAMSCI EAFE 100% Hedged11.770.35
iShares Currency Hedged MSCI EAFE Small-Cap ETFSmall CompanyHSCZMSCI EAFE Small Cap 100% Hedged10.560.42

Correction: This article was updated to transpose the Expense % and Return % column headers in the Best Small Company Funds table.

Correction: This article was updated to indicate that developed-markets funds bested rather than trailed their predecessors.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

The opinions expressed here are the author’s. Morningstar values diversity of thought and publishes a broad range of viewpoints.

More in Rekenthaler Report

About the Author

John Rekenthaler

Vice President, Research
More from Author

John Rekenthaler is vice president, research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Rekenthaler joined Morningstar in 1988 and has served in several capacities. He has overseen Morningstar's research methodologies, led thought leadership initiatives such as the Global Investor Experience report that assesses the experiences of mutual fund investors globally, and been involved in a variety of new development efforts. He currently writes regular columns for and Morningstar magazine.

Rekenthaler previously served as president of Morningstar Associates, LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. During his tenure, he has also led the company’s retirement advice business, building it from a start-up operation to one of the largest independent advice and guidance providers in the retirement industry.

Before his role at Morningstar Associates, he was the firm's director of research, where he helped to develop Morningstar's quantitative methodologies, such as the Morningstar Rating for funds, the Morningstar Style Box, and industry sector classifications. He also served as editor of Morningstar Mutual Funds and Morningstar FundInvestor.

Rekenthaler holds a bachelor's degree in English from the University of Pennsylvania and a Master of Business Administration from the University of Chicago Booth School of Business, from which he graduated with high honors as a Wallman Scholar.

Sponsor Center