Main International ETF (INTL)

The Main International ETF (INTL, on NASDAQ) is a straightforward, market-cap-weighted fund that holds the largest and most liquid publicly traded companies in developed countries outside the United States. It tracks the MSCI EAFE index — EAFE standing for Europe, Australasia, Far East — the standard benchmark for international developed-market equity investing.

The portfolio at a glance

INTL is a passive holding. It does not select stocks on the basis of their quality, valuation, or growth prospects; it simply mirrors the index it tracks, which means its portfolio is weighted by the market capitalisation of the companies — their total stock market value. A company with a market cap of 100 billion dollars will make up roughly twice the portfolio weight of a 50 billion dollar company. This mechanical approach keeps costs low and avoids the risks and pitfalls of active stock selection.

The fund’s geographic split is set by where the largest cap companies actually trade. Japan is typically the single largest component of the EAFE index, followed by the United Kingdom, France, Germany, Switzerland, and smaller European nations. Canada, Australia, and a small handful of other developed markets round out the remainder. The EAFE was designed to carve out a defined, administratively simple slice of the global stock market — the large, mature economies with well-established exchanges and corporate governance, excluding the United States and emerging markets.

Why investors use INTL

For a portfolio built to sit alongside a U.S. equity fund, INTL provides a quick, low-cost way to add international diversification. The rationale is straightforward: the U.S. is one country, and while it dominates global markets, an investor who holds nothing but U.S. stocks is betting that American companies will outperform the rest of the world indefinitely. That has been true for much of the past 15 years, but the historical record shows decades-long periods in which international markets delivered equal or superior returns. INTL lets an investor hold both without picking between them.

The fund is also useful for investors who want international exposure but have no interest in the complexity of factor tilts, emerging markets, or sector bets. It is the international equivalent of holding a U.S. market-cap-weighted index: broad, durable, and not trying to be clever.

Sector and country flavour

Because INTL follows market capitalisation, it naturally reflects the economic structure of the developed world outside the United States. Europe has historically been overweight in banks, luxury goods, pharmaceuticals, and industrials. Japan carries a heavy concentration in technology hardware manufacturers and automobiles. Switzerland punches above its weight in pharmaceutical and consumer-staples companies. This geographic and sectoral mix means INTL’s returns are tied not just to stock-picking skill (which the fund lacks, by design) but to the business-cycle and sector preferences that animate international markets.

The fund’s holdings include household names — LVMH, Shell, ASML, Toyota, Nestlé, Unilever — as well as thousands of smaller European and Asian firms that may be unfamiliar to American investors. That mix is a feature. By holding the whole market rather than a carefully curated list, INTL avoids the risk of being overweight on one management team’s best ideas at the expense of other viable businesses.

Costs and trading characteristics

INTL carries a very low expense ratio, typically in the 0.08 to 0.12 percent range. For an investment of $10,000, that translates to roughly $10 per year in fees — a figure that would have been impossible for most investors to achieve through active management or direct stock ownership just 20 years ago. The fund is highly liquid, trading millions of shares daily on NASDAQ, which means buy and sell orders are filled quickly without the need for the market to hunt for a counterparty.

The fund’s pricing is determined throughout the trading day, updated every few seconds, so buyers and sellers can transact at prices reflecting the current value of the underlying stocks. For investors with large positions, there is also the possibility of redeeming shares directly with the fund in exchange for the underlying portfolio, an in-kind mechanism that can further reduce transaction costs.

Currency exposure as a driver of returns

A quirk of international investing is that a meaningful portion of INTL’s returns — or losses — will come from currency movements that have nothing to do with the stocks themselves. When the U.S. dollar weakens relative to the yen, the euro, the pound, or the Swiss franc, the dollar value of the fund’s foreign holdings rises automatically. Conversely, a strong dollar erodes returns. Over the past decade, the dollar has been relatively strong, which has worked as a headwind for international equity returns even when the underlying companies have performed well. This is a feature of holding an unhedged fund; INTL does not attempt to smooth out or neutralise currency swings.

For some investors, this is acceptable or even desirable — currency diversification is its own form of hedging against long-term dollar weakness. For others, especially those with significant foreign-currency liabilities or income, the additional volatility is a cost of the strategy.

Risks and the case for INTL

INTL is as simple as international equities get, but simplicity does not mean there are no risks. The most obvious is market risk: stocks can fall, and international stocks have experienced crushing declines in any real bear market. There is also the secular risk that economic growth in developed Europe and Japan lags the United States, driving years of relative underperformance. There is regulatory and geopolitical risk: a major trade war or political disruption could hammer these markets. And there is the currency risk noted above.

Yet INTL exists precisely because investors believe these risks are worth bearing in exchange for a diversified return stream. The fund is most useful for investors with a long time horizon, a commitment to not panic-selling after a drawdown, and a view that developed-market exposure beyond the U.S. is a durable part of a balanced portfolio.

How to follow INTL

The simplest research is comparative: run a chart of INTL’s returns alongside a U.S. equity index fund over rolling 5- and 10-year periods, and ask yourself whether the diversification benefit is real or theoretical. Check the fund’s fact sheet quarterly for the geographic breakdown and the top 10 holdings, which will give you a sense of whether the portfolio is flowing with the market or accumulating concentration. Watch for commentary on EAFE index changes — when large companies are added or removed from the index, INTL’s portfolio follows automatically. Finally, monitor currency movements in a macro sense: when the dollar is strong, INTL will face a headwind; when it weakens, the fund benefits from a tailwind that has little to do with the underlying companies’ fundamentals.