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Looking at International Stocks? Lean Into Emerging Markets, Instead

· ETF Trends

Looking at International Stocks? Lean Into Emerging Markets, Instead

U.S. investors are facing quite a bit of concentration risk, even as markets seem to be broadening. Entering 2026, prior to all the geopolitical volatility, investors were clamoring for ex-U.S. equities. Now, despite that continued volatility, international stocks can still appeal. Looking longer term, however, emerging markets may actually be the more intriguing route, via funds like the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM).

Key Takeaways:

  • GEM’s 35 basis point (bps) fee makes it a competitive offering in the space.
  • Per ETF Database data, the fund has outperformed its category average over one-, three-, and five-year periods.
  • The fund can help diversify away from overvalued U.S. stocks.

GEM charges a 35 bps fee to track a proprietary index of emerging markets stocks. The emerging markets ETF applies a multi-factor approach to the category, The fund looks for equities displaying healthy momentum and good value, as well as high quality and low volatility.

That has helped the fund perform well this year. According to ETF Database data, GEM has returned 22.1% YTD. That has outperformed the ETF Database Emerging Markets Equities category average since January 1. What’s more, the fund has outperformed over longer periods, as well. It has beaten the average over one-, three-, and five-year periods.

Why emerging markets writ large? Even while global energy prices loom over emerging markets, now could be the time to get in before a long-term resurgence. If the Strait of Hormuz situation resolves in the near or medium term, emerging markets could once again spike.

They may do well to start 2027, for example, if energy costs drop. At the same time, they include markets like India, with a rising middle class, or Brazil, with strong financial companies. Those markets can appeal relative to slowing European markets, for example.

See more: Income ETF GPIQ Adds $2.5 Billion in YTD Flows

GEM’s multifactor approach in particular could help it provide a durable, consistent strategy for portfolios. Investors already have plenty of exposure to domestic stocks and those big, AI hyperscaler names. GEM’s consistent outperformance may make it a solid diversifier with upside in the next 12 months.

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