Investing in U.S. stocks has been a time-tested way to grow your wealth over the years. That's evident with the performance of the S&P 500 index, which includes the top companies on the U.S. markets: It has risen by close to 80% in just the past three years.
But because the index has risen so much in a relatively short time frame, you may want to consider investments in other parts of the world that can unlock new growth opportunities and, at the same time, allow you to diversify your portfolio and reduce some of your risk.
One exchange-traded fund (ETF) that could be a compelling option today is the iShares Core MSCI EAFE ETF (IEFA +0.41%). Here's what you need to know about this fund.
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It invests in companies based in Europe, Asia, and Australia
A distinct feature of the iShares Core MSCI EAFE ETF is that it targets stocks in developed countries and specifically excludes the U.S. and Canada. This can make the ETF attractive if you want to globalize your portfolio and not strictly focus on one part of the world.
Japanese stocks account for 25% of the fund's holdings, followed by the United Kingdom at 14%, and many other European nations. Since it focuses on developed countries, there aren't any Chinese-based companies in the fund. This can be crucial for investors who are worried about tariff risk and having too much exposure to China.
The ETF outperformed the S&P 500 last year
Last year was another strong one for the S&P 500, with the index rising by 16%. But the iShares ETF did even better, amassing gains of more than 27%. While it has underperformed the index over the past five years (83% returns versus 31%), it could be indicative of the growing appetite for investors to diversify outside of high-priced U.S. stocks and into international stocks.
The ETF's portfolio is made up of many top growth stocks, including ASML Holding, AstraZeneca, and SAP. Together, the financial, industrial, and healthcare sectors account for more than half of the fund's portfolio.
Another great feature about this ETF is that it isn't heavily tilted to any one stock; its largest holding is ASML, which makes the photolithography systems needed to produce semiconductors, but it still represents only 2% of its overall portfolio. With many ETFs that track the S&P 500, there's a lot of exposure to just a few stocks, which can leave investors vulnerable if there is a market correction. With this ETF, however, you're getting a much more diversified investment.
NYSEMKT: IEFA
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The fund's fees are low, and its yield is high
In addition to benefiting from the fund's growth, you can also collect a fairly high dividend along the way. Currently, the ETF pays 3.6%, which is more than three times the rate of the S&P 500's yield of 1.1%. And at 0.07%, the iShares Core MSCI EAFE ETF has a low expense ratio, which will ensure that fees aren't taking a big chunk out of your overall returns.
It can continue to outperform the market in 2026
The new year is just a few weeks old, and the iShares ETF is continuing its rally. As of Jan. 19, it was up around 4% (better than the S&P 500's gains of a little more than 1%). There may still be more room ahead for the ETF to rise even higher, especially if investors look to reduce their exposure to U.S. stocks and instead seek companies based in other parts of the world.
The iShares Core MSCI EAFE ETF -- with its well-balanced portfolio that gives you access to not only growth stocks but also quality dividend stocks -- could be a no-brainer option to hold in 2026 and beyond.
