Investing in international stocks presents a compelling opportunity in today’s global market landscape. Historically, market performance trends have shown that international equities often outperform U.S. equities in certain decades.

A few years ago, I was honored to be ranked #2 globally as a wealth management influencer by Onalytica, with the #1 spot held by Dr. Liz Ann Sonders, the Chief Economist at Charles Schwab (Onalytica).

As highlighted by Schwab’s top economists, this decade could very well be one where international stocks shine but this reality has been delayed by COVID, offshore wars and hasty green policies affecting oil and gas supply. For investors seeking diversification, yield, and long-term growth potential, international stocks or ETFs focused on value and upside deserve serious consideration.

The Case for International Stocks

International equities often trade at a discount compared to U.S. stocks. This valuation gap, combined with global economic growth trends, creates significant potential for upside. Moreover, the performance of international markets tends to follow different cycles than that of U.S. markets. Diversifying a portfolio with international investments helps mitigate risk by spreading exposure across varied economic regions and sectors.

One of the most attractive aspects of international investing is the opportunity to identify high-quality blue-chip stocks in sectors such as banking, real estate, oil and gas, energy, and infrastructure.

Many of these companies offer robust dividend yields—often in the range of 3% or higher. These dividends not only provide consistent income but also cushion returns during periods of market volatility. I did an ETF screen using Ai Artificial Intelligence services, and there are several great ETFs trading 20-30% off their 52 week highs that have great dividends.

If Ukraine is Solved and Gas Prices Come Down, International Will Go to New Heights

When I was recently working in Asia—specifically in China, Singapore, and Indonesia—my interactions with executives and government officials revealed some fascinating theories about the current global economic climate. Many of the individuals I interviewed highlighted how the Ukraine war and the proxy war with Russia have created significant obstacles for international business.

These challenges include increased transaction costs, rising logistical expenses, and elevated energy prices, all of which add to the cost of producing goods and services which hurts middle class Americans the hardest. According to these leaders in Asia, if the conflict in Ukraine could be resolved through basic diplomacy, it would likely result in a strong reduction in oil and gas prices.

This, in turn, could lead to substantial cost reductions across the board for businesses worldwide, improving profitability and potentially driving stronger global economic growth. Such a development would make international markets even more attractive, amplifying the case for investing in international stocks with value and upside potential. Also, the Ukraine war is creating higher banking costs, transaction costs, and currency trading costs worldwide.

Demographics and Buyers Are on Your Side

International demographic investment experts, including Harry Dent, emphasize the significant growth potential in markets outside the United States. Dent's research highlights that the vast majority of the global population—approximately 96%—resides beyond U.S. borders, presenting substantial opportunities for investors. Demographic experts note that emerging economies, particularly those within the BRICS nations (Brazil, Russia, India, China, and South Africa and Saudi Arabia), are experiencing rapid demographic shifts and economic expansion.

These trends suggest that investing in these regions is not only advantageous but may become increasingly essential for diversified portfolios. Dent's analysis underscores the importance of understanding global demographic patterns to capitalize on international investment opportunities. People also overlook the 750 million people in South Asia and the other 1.5 billion plus buyers in Africa.

Harry Dent

When I was teaching MBA students in China in September, I asked my students where they spend most of their money. People typically spend their money on essential categories such as housing, which includes rent or mortgage payments and utilities like electricity and internet. Food and groceries are another major expense, along with transportation costs such as fuel, public transit, car payments, and insurance. Healthcare, covering medical expenses and insurance, is also a priority, as are utilities like water, heating, and mobile phone plans.

Debt repayment, including student loans and credit cards, often takes a significant portion, alongside insurance for vehicles, homes, or life. Additional spending includes clothing and personal care, childcare and education, and savings or investments for future security. These priorities vary based on individual needs and lifestyles but they illuminate the types of demographic spending that will be prevalent offshore with over 7 billion people.

Tax-Advantaged Strategies for Americans

For American investors with tax-advantaged accounts like 401(k)s, IRAs, or Roth IRAs, the benefits of international dividend stocks are amplified. Dividends, capital gains, and interest income generated within these accounts grow tax-deferred—or, in the case of Roth IRAs, tax-free. This means investors can reinvest dividends and compound their returns without the drag of annual taxation and retained earnings tax.

For instance, holding high-dividend-paying international stocks, growth stocks or growth and yield ETFs in a Roth IRA is particularly advantageous. Since Roth withdrawals are tax-free, the investor can fully enjoy the compounded growth without incurring tax liabilities at retirement.

Finding the Right Investments

The key to successful international investing lies in identifying blue chip related securities and ETFs that combine yield, value, and growth potential. ETF screeners and platforms that analyze international markets are invaluable tools in this pursuit. These resources help investors pinpoint quality ETFs or stocks that balance strong fundamentals with attractive dividends and potential upside.

ETFs, in particular, offer a diversified and cost-effective way to gain exposure to international markets. Many ETFs focus on high-dividend or value stocks, making them ideal for investors who want income and growth. When reviewing your ETF, make sure that its primary holdings are good solid companies with great demographics as customers. Additionally, ETFs often come with lower fees and the convenience of instant diversification across geographies and industries.

Inflation and the US Market

While some argue that U.S. equities remain overvalued, inflationary pressures over the last four years have shifted the economic landscape. Inflation erodes purchasing power, and investors often look for tangible assets or markets where growth outpaces inflation. International markets, especially in emerging economies or undervalued developed markets with beneficial tax jurisdictions, present opportunities to capitalize on this trend.

Conclusion: Yield, Value, and Upside Potential

International stocks and ETFs provide a trifecta of benefits for investors: yield through dividends, value via discounted valuations, and upside potential in growing global markets. For American investors with tax-advantaged accounts, the ability to defer or eliminate taxes on gains and dividends adds further appeal.

As international equities have yet to fully take off in this decade, now is a timely moment to explore these opportunities. Leveraging tools like ETF screeners and staying disciplined in finding quality investments can position investors to benefit from a potential surge in international market performance. By focusing on yield, value, and upside, investors can build resilient portfolios poised for long-term success.

With the new administration taking power in January with the Presidency, House of Representatives, and Senate all going to Trump’s party, this international investing move is a calculated risk in investing in great companies worldwide as risks, regulations, fees, interest rates, and costs may all come down in the short term.

** Please consult with a locally licensed professional before making any important investment, retirement, or tax decision.

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Commissioner George Mentz JD MBA CILS CWM® is the first in the USA to rank as a Top 50 Influencer & Thought Leader in: Management, PM, HR, FinTech, Wealth Management, and B2B according to Onalytica.com and Thinkers360.com. George Mentz JD MBA CILS is a CWM Chartered Wealth Manager ®, global speaker - educator, tax-economist, international lawyer and CEO of the GAFM Global Academy of Finance & Management ®. The GAFM is a EU accredited graduate body that trains and certifies professionals in 150+ nations under standards of the: US Dept of Education, ACBSP, ISO 21001, ISO 991, ISO 29993, QAHE, ECLBS, and ISO 29990 standards. Mentz is also an award-winning author and award winning graduate law professor of wealth management of one of the top 30 ranked law schools in the USA.Mentzenborg is just a term of art to describe the theory and process by George Mentz JD MBA ChE. CWM is for Chartered Wealth Manager ® and ChE Chartered Economist ® is a credential for economics professionals.