What is INTL? (Pros, Cons, and Strategies)

Investing in international markets can diversify your portfolio and potentially enhance your returns. One way to achieve this is by investing in an international ETF. One such ETF is INTL (Main International ETF). In today's post, we'll dive into what INTL is, along with its advantages, disadvantages, and potential investment strategies.

What is INTL?

INTL is an international ETF designed to provide exposure to a broad array of global markets outside the United States. INTL stands for the Main International ETF.

INTL aims to track the performance of international markets by investing in a diversified mix of stocks from developed and emerging markets. This ETF offers investors a way to gain exposure to foreign equities without having to pick individual stocks in unfamiliar markets.

Key Features of INTL

• Global Exposure: INTL invests in a wide range of companies across various sectors from developed and emerging markets globally.
• Market Diversification: By holding shares in numerous companies from different countries, INTL offers diversification that can reduce the risk associated with investing in a single market.
• Equity Focus: The ETF focuses primarily on equity investments, providing potential for long-term capital appreciation.

The selected stocks are chosen based on criteria such as market capitalization, trading volume, industry representation, and geographic distribution.

INTL Composition

INTL is composed of a diverse array of global companies like Nestle (Switzerland), Alibaba (China), Toyota (Japan), and Samsung (South Korea). It includes firms across various sectors such as consumer goods, technology, finance, and healthcare, among others. This broad composition helps mitigate the risks tied to any single industry or region.

Pros of INTL

Global Diversification

One of the primary advantages of INTL is its ability to provide global diversification. By investing in a variety of international markets, this ETF reduces the risk associated with market-specific downturns. In a world where economic conditions can vary widely by region, this diversification is a critical strength.

Potential for Higher Returns

Emerging markets, in particular, can offer higher growth potential compared to more mature markets. By including these markets in the portfolio, INTL captures growth opportunities that might not be available in domestic markets.

Currency Diversification

Investing in INTL also implies exposure to different currencies, which can serve as a hedge against a declining U.S. dollar. This currency diversification can be an essential aspect of a well-rounded investment strategy.

Cons of INTL

Higher Volatility

International markets, especially emerging ones, can be more volatile compared to their U.S. counterparts. Political instability, economic changes, and currency fluctuations can lead to increased risk and market swings.

Higher Expense Ratio

International ETFs like INTL often come with higher expense ratios compared to domestic ETFs. These fees, which cover management and operational costs, can eat into your returns over the long term.

Potential for Lower Dividend Yields

While some international companies offer attractive dividends, the overall dividend yield of INTL may not be as high as some U.S.-based dividend-focused ETFs. Investors seeking regular income might find this a limitation.

INTL Investment Strategies

INTL can be a valuable addition to a diversified portfolio. However, it is best suited for investors with a long-term horizon and a tolerance for higher volatility.

Long-term Investment Strategy

Due to its exposure to volatile emerging markets, INTL is most appropriate for long-term investors who can withstand market ups and downs. An investment horizon of at least 10 years can help investors ride out short-term volatility and benefit from potential high growth in the emerging markets.

Strategic Asset Allocation

INTL can be used as a part of a broader strategic asset allocation plan. For instance, you could allocate a certain percentage of your portfolio to international markets via INTL, weighted alongside U.S. equities, bonds, and other asset classes. This approach can enhance diversification and potentially boost returns over the long run.

Regular Rebalancing

Given the variable nature of international markets, regularly rebalancing your portfolio can ensure that your allocation to INTL remains consistent with your investment goals. This involves buying or selling shares to maintain your desired level of exposure.

Conclusion

INTL offers a compelling opportunity for investors looking to diversify their portfolios globally. While it comes with higher volatility and expense ratios, its potential for higher long-term growth and global diversification makes it a valuable tool for dedicated long-term investors. By integrating INTL into a strategic, diversified portfolio and adhering to a long-term investment approach, investors can potentially enjoy the extensive benefits of international market exposure.