Beyond Borders: 10 Key Reasons to Consider IXUS International Stock ETF

For over a decade, U.S. equities dominated global returns, making it easy to overlook overseas opportunities. But tides are shifting. As of mid-2023, the iShares Core MSCI Total International Stock ETF (IXUS) has climbed roughly 13.5% year-to-date, surpassing the S&P 500 and nearly matching the tech-heavy Nasdaq-100. This performance signals that international stocks may deserve a second look. Below are ten compelling reasons why IXUS could be a smart buy for investors seeking global diversification, low costs, and strong recent momentum.

1. What Exactly Is IXUS?

IXUS is an exchange-traded fund that tracks the MSCI ACWI ex USA Investable Market Index, which covers large-, mid-, and small-cap stocks from both developed and emerging markets outside the United States. It includes over 3,800 holdings across more than 40 countries. Unlike some international funds that focus only on large caps, IXUS provides broad exposure, effectively capturing the global opportunity set beyond American borders. This makes it a one-stop solution for investors aiming to reduce home-country bias.

Beyond Borders: 10 Key Reasons to Consider IXUS International Stock ETF — Source: www.fool.com

2. Recent Outperformance Against U.S. Benchmarks

In 2023, IXUS delivered an impressive 13.5% year-to-date gain, beating the S&P 500 and closely trailing the Nasdaq-100. This marks a notable reversal after years of U.S. supremacy. The fund's strong performance has been fueled by a weaker dollar, robust earnings from European and Japanese companies, and renewed interest in value-oriented sectors. For investors accustomed to U.S. dominance, this shift highlights the potential of global markets to lead at times.

3. Critical Diversification Benefits

Diversification is a cornerstone of smart investing, and IXUS offers exactly that. By holding stocks from dozens of countries, it reduces the impact of a single nation's economic or political turmoil. International equities often have a low correlation with U.S. stocks, especially during periods of dollar weakness or regional growth spurts. Adding IXUS to a primarily U.S. portfolio can smooth out returns over the long run, potentially lowering overall risk without sacrificing growth.

4. Blend of Developed and Emerging Markets

IXUS allocates roughly 75% to developed markets (e.g., Japan, UK, Canada, Europe) and 25% to emerging markets (e.g., China, India, Brazil). This combination provides stability from mature economies and growth potential from faster-developing nations. Investors gain exposure to giants like Nestlé, Samsung, and Tencent, as well as smaller companies driving innovation in their regions. The balanced mix helps capture global trends without overconcentrating in any single risk category.

5. Ultra-Low Expense Ratio Saves Money

With an expense ratio of just 0.07%, IXUS is one of the cheapest international ETFs on the market. That means for every $10,000 invested, you pay only $7 per year in fees. Such low costs significantly boost long-term compounding. Many actively managed international funds charge ten times more, yet often fail to beat IXUS’s passive benchmark. Cost-conscious investors will find IXUS a highly efficient vehicle for global exposure.

6. Sector Diversification Beyond Tech

The U.S. market is heavily tilted toward technology stocks, which can lead to volatility during tech sell-offs. IXUS offers a more balanced sector breakdown: financials, industrials, consumer staples, healthcare, and materials each hold meaningful weight. This diversification reduces reliance on any single industry. For instance, top holdings include financial institutions like HSBC, consumer staples like Unilever, and healthcare companies like Roche—providing a steadier growth profile.

7. Top Holdings: Household Names You Know

IXUS’s largest holdings read like a who’s who of global business: Nestlé, Samsung Electronics, Tencent, ASML, and Toyota. These are well-established companies with strong competitive advantages and international revenue streams. Many generate significant sales from outside their home countries, providing indirect exposure to U.S. and other economies. This built-in diversification makes IXUS a reliable core holding for long-term investors.

8. Currency Risk and How It Plays Out

Since IXUS is not currency-hedged, its returns are affected by fluctuations in the U.S. dollar versus foreign currencies. A weakening dollar—as seen in 2023—boosts returns for U.S. investors by making foreign assets more valuable in dollar terms. Conversely, a strengthening dollar can dampen returns. This currency exposure adds another layer of diversification: it can hedge against a falling dollar, which often coincides with rising inflation or U.S. debt concerns.

9. Potential Tax Advantages for U.S. Investors

International ETFs like IXUS can offer tax benefits. Many countries impose withholding taxes on dividends, but U.S. investors may qualify for a foreign tax credit to avoid double taxation. Additionally, the fund structure minimizes capital gains distributions. While tax rules are complex, IXUS's efficiency can lead to higher after-tax returns compared to holding individual foreign stocks. Consult a tax professional to maximize these benefits.

10. Impressive Risk-Adjusted Returns vs. Nasdaq-100

IXUS has nearly matched the Nasdaq-100’s performance in 2023, but with significantly lower volatility. The Nasdaq is dominated by high-growth tech giants that can swing wildly on interest rate news or earnings surprises. IXUS’s broader base—covering value, growth, and defensive sectors—tends to deliver smoother returns. For risk-averse investors, this combination of strong performance with lower drawdowns is particularly attractive.

In summary, IXUS offers a compelling mix of low cost, broad diversification, and recent outperformance that makes it worth serious consideration. While no investment is without risk—currency moves, political events, and global recessions can affect returns—the fund’s structure and track record suggest it can serve as a solid anchor for an internationally diversified portfolio. As global economic leadership rotates, IXUS positions investors to capture opportunities far beyond U.S. borders. Ready to expand your horizons? Add IXUS to your watchlist today.