Best International Equity ETFs of 2025
ETFs are booming in the US, but that doesn't mean investors are keeping their investments stateside.
International equity ETFs that invest in publicly traded companies have surged this year, posting returns of 20% or more and cementing international funds at the top of the heap of the best performing funds of 2025's first half. The massive gains were due to overperforming European markets and strong performing sectors in other countries.
The outperformance in Europe, relative to both the US and international stocks more broadly, can be attributed to an 'increased willingness' for those countries to invest in companies that help drive economic growth, said Zachary Evens, a Morningstar research analyst. 'Banks and utilities and industrials and communication service companies, like telecoms, these companies are more boring,' he said. 'They don't typically grow very fast, but they benefit from broad economic growth, so a lot of the outperformance has been concentrated in some of those stocks.'
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Across The Pond
European stocks have outperformed their US counterparts for the past three years, reversing a trend of US dominance that began following the Great Recession, with the MSCI EMU Index outpacing the S&P 500 by more than 35 percentage points since 2022, according to Schwab. International stocks in general have also beaten American stocks, as measured by the MSCI EAFE Index. Some of the top-performing international markets ETFs so far this year are:
The Schwab International Dividend Equity ETF (SCHY), which tracks a market-cap-weighted index of foreign stocks and had YTD returns of 20.7%.
The Vanguard Total International Stock ETF (VXUS), which has an expense ratio of .05% and holds more than 8,600 stocks in companies from both developed and emerging markets. It posted YTD returns of 18.3%.
The SPDR Portfolio Emerging Markets ETF (SPEM), which tracks emerging markets in countries like China, India, Brazil, South Africa, and Mexico and had YTD returns of 14.3%.
Still, diversification is key to avoiding region-specific downturns. 'If Spain grows by a lot, but France falters, then diversification will even that out… That also goes for the sector side,' said Evens. 'You would be better suited to be more diversified across sectors and countries to minimize those negative impacts.'
All Hail the Sector. Sector performance tends to be the main driver of stock performance, with US markets leaning heavily on tech companies in recent years. Still, outside factors — inflation, political deals, tariffs — have an impact on sectors, which in turn affects markets, according to Evens. 'What impacts the performance of those sectors would be more idiosyncratic risks or geopolitical factors, or economic factors,' he said. 'Weighing those is how investors can think about potential outperformance or underperformance of the respective markets.'
This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter.
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