Remember all the 2025 chatter about international stocks finally outperforming domestic equities? Well, it's continuing in 2026, and with good reason. Since the start of the year, the MSCI EAFE index is up 9.3%, making the 1.5% gained by the S&P 500 look weak by comparison.
For investors considering the benefits of geographic diversification, now may be the time to act. That task is easily accomplished with an array of exchange-traded funds (ETFs), including the Schwab International Equity ETF (SCHF 1.13%).
This international ETF has a lot of appeal because it removes the burden of overseas stock picking, making it ideal for investors who want ex-U.S. exposure while maintaining the ability to sleep easily at night. However, learning the ins and outs of the Schwab fund is essential before jumping in.
It's time to get investing passports stamped, and this ETF makes it easy. Image source: Getty Images.
With this ETF, nuance matters
This ETF's name is reflective of what it is -- an international equity fund, and it's not in the least bit misleading. Where some investors may get tripped up is comparing the Schwab ETF to another fund that has "total" in its name.
The $61 billion Schwab ETF focuses on developed-market stocks outside the U.S. In contrast, a total international ETF, such as the Vanguard Total International Stock ETF (VXUS 0.94%), also allocates to companies from emerging markets.
On a related note, the Schwab ETF's underlying index matters. That gauge is the FTSE Developed ex US index, which differs from the aforementioned MSCI EAFE Index. Put simply, MSCI classifies South Korea as an emerging market. FTSE does not, and as a result, the Schwab ETF holds South Korean stocks, and that's been to its advantage over the past several years.
In other words, not all index funds addressing the same asset class are carbon copies of each other. For geographic diversification, the Schwab ETF fills a void some of its rivals lack, as even with a relatively modest 5.5% weight to South Korean stocks, it expands the Asia ex-Japan playing field. That South Korean exposure also pushes the Schwab ETF's technology weight to 10.9%, well ahead of the 8.7% found in a leading MSCI EAFE ETF.
And since geography is essential for international ETFs, it's worth noting that the FTSE Developed ex US Index includes Canadian stocks, but its MSCI rival doesn't. So the Schwab fund has an almost 11% weight to Canadian stocks, and that's a plus at a time when that market is outperforming its southern neighbor.
Big, broad, and inexpensive
Adding international exposure to a portfolio is only one side of the diversification equation. When doing so with ETFs, ensuring the funds being deployed are themselves diverse is essential as well.
The Schwab international fund answers that call. It's home to 1,498 stocks, none of which command more than 1.96% of the lineup, from more than a dozen countries. That's a good amount of diversification.
This Schwab ETF is also a good deal for cost-conscious investors, as its expense ratio is a paltry 0.03% per year, or $3 on a $10,000 position.
