This Global ETF Is Beating the S&P 500 in 2026 -- but There's 1 ETF That I Like Better

Many Americans might not realize it with all the excitement around artificial intelligence (AI) growth in the U.S. tech sector, but America's stock market is not the only place to invest. International stocks have also been strong performers recently. Let's look at two low-cost international stock ETFs that have beaten the S&P 500 index year to date and for the past year.

The Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) has delivered a total return of about 30.3% in the past year, compared to 24.3% for the S&P 500. The iShares Core MSCI Total International Stock ETF (NASDAQ: IXUS) has delivered a slightly lower total return of about 28.7% in the past year.

IXUS Total Return Level data by YCharts

Even though it has underperformed the Vanguard fund, this iShares international ETF might be a better buy for long-term investors. Let's look at a few reasons why.

VYMI vs. IXUS

Both international ETFs offer low fees (they charge the same low expense ratio of 0.07%) and broad diversification; one fund owns 1,582 stocks while the other holds an even broader portfolio of 4,340 stocks.

Here's a quick breakdown of the details:

Data sources: Vanguard, iShares, Yahoo! Finance.

Why buy the Vanguard International High Dividend Yield ETF?

The Vanguard International High Dividend Yield ETF has slightly outperformed the iShares fund for the past 10 years. The Vanguard fund's 3.42% dividend yield is impressive and higher than that of many of the best dividend index funds.

Since it focuses more on companies that pay high dividends, a larger percentage of the Vanguard fund's holdings are in developed markets in Europe, like the United Kingdom and Switzerland. Tech stocks aren't ranked in the fund's top five sectors -- its portfolio is more heavily invested in financial stocks, energy stocks, and other sectors.

If you want to make a defensive play against a possible tech stock downturn, the Vanguard International High Dividend Yield ETF could help put your money to work in different parts of the global economy. And this fund still might be undervalued -- its P/E ratio is 14.41, lower than the iShares fund's.

Image source: Getty Images.

Why buy the iShares Core MSCI Total International Stock ETF?

Although the iShares Core MSCI Total International Stock ETF has underperformed the Vanguard fund in the past 10 years, it's showing more momentum recently. The iShares fund has outperformed the Vanguard fund and the S&P 500 year to date.

IXUS Total Return Level data by YCharts

The iShares fund has a lower dividend yield (2.83%) than the Vanguard fund, but that yield is still higher than that of some of the best dividend index funds. And the iShares fund has a P/E ratio of 18.29, which is lower than the S&P 500 index's P/E ratio of 31.84.

This fund is well diversified across a few thousand more stocks than the Vanguard fund. And the iShares fund is a bit heavier on tech (20.5% of the portfolio), giving you access to stocks that are benefiting from the AI boom, like semiconductor stocks in Taiwan and South Korea.

Why buy IXUS instead of VYMI?

Neither of these funds ranks among the best international ETFs, and I don't own either of them. But if I were going to choose one, I would buy the iShares Core MSCI Total International Stock ETF because it offers broader diversification. I believe diversification is especially important when you're buying international stocks.

Investing in international stocks brings a few more uncertainties and possible risks. No one knows which companies, countries, or currencies are going to outperform or underwhelm in the future. The higher dividend yield and lower P/E ratio on the Vanguard fund look tempting. But if you're a long-term investor who's ready to buy and hold this fund for at least five years, broader diversification is often the better choice.

Instead of focusing too much on any one sector or theme, most investors might be better off just buying as many international stocks as possible and letting the market pick the winners over time. The iShares Core MSCI Total International Stock ETF lets you do that. It offers an easy, low-cost way to own a broad portfolio of thousands of international stocks.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.