For investors heavily weighted toward U.S. growth equities, international ETFs could be a useful diversification play for portfolios. Developed-market international equities, particularly in Europe, appear to have significant upside before reaching their long-term valuation levels relative to the S&P 500, according to recent research from Fidelity Investments.
Adding international exposure can be a way to diversify and hedge against this concentration risk. Historically, the international market has offered a broad array of investment possibilities. That is both in the sheer number of companies and the diversity of countries, sectors, and industries, according to Fidelity. Notably, the MSCI EAFE Index, with approximately 51% of its stocks from Europe as of April 2025, exhibits less company-level concentration compared to the S&P 500.
Exploring International ETFs for Diversification
Investors seeking to add international equity exposure have several compelling options, including the Fidelity Enhanced International ETF (FENI ), the Fidelity International Value Factor ETF (FIVA ), and the Fidelity International High Dividend ETF (FIDI ).
FENI, an actively managed fund, primarily invests in stocks within the MSCI EAFE index, which includes mid- and large-cap companies in developed markets excluding the U.S. and Canada. With a competitive expense ratio of 29 basis points, FENI’s stock selection process considers traditional factors like quality, growth, momentum, and valuation, while also incorporating nontraditional factors such as options market data for a more complete evaluation of return potential.
For investors favoring a value-oriented approach, FIVA charges 18 basis points and aims to track the Fidelity International Value Factor Index. This index identifies mid- and large-cap stocks in developed countries outside the U.S. that may be undervalued or trading at a discount, capitalizing on market dislocations in foreign markets.
Finally, FIDI offers a factor-based approach to international equities and has an expense ratio of 18 basis points. This fund seeks large and midcap stocks within its universe that offer high dividends. Dividends can enhance portfolio income and help mitigate volatility, providing a more stable return profile.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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