Could This International ETF Be One of the Best Investments of 2026?

Even after the recent market turbulence caused by the onset of the Iran conflict, stock valuations in the U.S. market are rather expensive on a historical basis. The average S&P 500 stock trades at nearly 23 times earnings, a historically elevated level, making it difficult for investors to find true “bargains” to add to their portfolios.

One potential solution is to take a closer look at adding some international stocks. Right now, virtually every major notable international stock index is trading for a significant discount to its U.S. counterparts. As one example, the MSCI EAFE index, which tracks international stocks from developed countries, trades for just over 15 times earnings. Not only that, but most foreign stock indices have higher dividend yields as well – the MSCI EAFE has a 3.4% yield as of this writing, compared to about 1.5% for the S&P 500.

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International stocks spent the better part of the last decade underperforming their U.S. counterparts, but that changed last year. Non-U.S. stocks outperformed the S&P 500 by more than 10 percentage points in 2025 and are substantially outperforming so far in 2026. And they _still _trade at the valuation discount described earlier.

The Schwab International Equity ETF

You don’t need to pick and choose individual stocks to get excellent international exposure in your portfolio – there are some excellent international ETFs that could be worth a closer look.

One in particular is the Schwab International Equity ETF (SCHF 1.04%), which tracks an index of mid- and large-cap stocks from developed countries outside the United States. Top markets represented in the fund’s holdings are Japan, the U.K., Canada, and France.

There are approximately 1,500 stocks in the ETF, with the largest holding accounting for just 1.64% of its assets, so it’s not highly concentrated. Top holdings include several companies you’re probably familiar with, such as ASML Holding, Samsung, AstraZeneca, and Nestle, just to name a few.

This is an extremely low-cost index fund, with an expense ratio of just 0.03%, so you’ll keep more of your investment gains than with most other ETFs. This means that for every $10,000 in assets, your annual investment expenses will be just $3. It has a dividend yield of more than 3.2%, making it a solid choice for income investors, and has the potential to produce market-beating long-term returns, especially given the relatively cheap valuations of international stocks.

To be sure, there are some notable risks of investing in international stocks. Currency headwinds and geopolitical headwinds are two examples, and it’s worth keeping in mind that international index funds don’t have as much exposure to the AI trend as their U.S. large-cap counterparts. But if you’re looking for an attractive value in an expensive market, the risk-reward dynamics of the Schwab International Equity ETF make a lot of sense.