Alright, grab a mug, settle in. We’re going to chat about something that might sound a bit dry – ETFs – but trust me, it’s actually about building a smarter, more resilient financial future. And who doesn’t want that?

The “Global” Misconception That Drove Me Crazy

You know, when I first started in this industry over a decade ago, I often heard people talk about “global diversification” with a portfolio that was, let’s be honest, 80% S&P 500. It used to make me inwardly groan. It’s like saying you’re eating a balanced diet but only ever having chicken and broccoli. Sure, it’s part of a diet, but it’s not the whole story, is it?

For years, I’ve been helping clients untangle this very issue: how do you truly diversify beyond the US without making your head spin with individual foreign stock picks or country-specific risks? Because let’s be real, tracking every geopolitical tremor in every emerging market isn’t anyone’s idea of a fun Tuesday afternoon.

That’s where Exchange Traded Funds (ETFs) come in, and specifically, a combination I’ve found myself increasingly discussing with peers and recommending to suitable clients: ACWX as a core international holding, complemented by IDMO for a little extra tactical punch.

Why This Actually Matters: Beyond Your Backyard

Look, the US market has been on an incredible run. No denying it. But as someone who’s spent over a decade dissecting market cycles, I’ve seen firsthand that no single market leads forever. Relying solely on the US, while comfortable, leaves you exposed to significant concentration risk. We’re talking about missing out on growth opportunities elsewhere, and frankly, a lack of true diversification.

Here’s what caught my attention, and frankly, why I push this so much: The rest of the world (developed and emerging) makes up a huge chunk of global GDP and market capitalization. To ignore it is to leave potential returns on the table, and to lose out on the natural hedging that different economies provide. It’s like owning a restaurant with only one signature dish – what happens when people crave something else?

Building Your Foundation: ACWX as Your Global Anchor

So, how do we get that global exposure without the headache? Enter ACWX – the iShares MSCI ACWI ex-U.S. ETF.

Honestly, if you’re looking for a broad, diversified way to invest in everything outside the US, this is a fantastic candidate for a core holding.

  • What it is: ACWX tracks the MSCI ACWI ex USA Index. “ACWI” stands for All Country World Index, so “ex-U.S.” means it holds large and mid-cap stocks across developed and emerging markets, excluding the United States. Think Europe, Japan, Canada, Australia, China, India, Brazil – the whole global smorgasbord, just not your local Apple or Microsoft.
  • Why it’s a “core”:
    • Simplicity: It’s one ETF for massive global diversification. Seriously, one ticker for thousands of companies across dozens of countries. As someone who’s built countless portfolio models, this level of efficient diversification is gold.
    • Diversification: You’re not picking winners or losers in specific countries. You’re getting broad exposure to global economic growth wherever it happens. This reduces idiosyncratic risk (the risk of something bad happening to one company or country).
    • Cost-Effective: Its expense ratio is competitive for what it offers. You’re getting institutional-grade diversification without the institutional fees.
    • Long-Term Play: This isn’t a trading vehicle. It’s for the long haul, a foundational piece that helps ensure your portfolio isn’t overly reliant on any single market. I’ve used similar broad international funds in client portfolios for years, seeing them weather various economic storms because of their inherent diversification.

I think of ACWX like the sturdy, well-engineered chassis of a car. It’s reliable, it gets you where you need to go, and it forms the essential base for everything else.

The Plot Twist: Adding a Little Spice with IDMO

Now, ACWX is great for broad exposure, but what if you want to be a bit more strategic? What if you believe in factor investing – specifically, the idea that stocks with strong recent performance tend to continue performing well, at least for a period?

This is where IDMO – the Invesco S&P International Developed Momentum ETF – comes in as an intriguing complement.

  • What it is: IDMO focuses on stocks within developed markets (excluding South Korea, often classified as developed) that have exhibited strong price momentum. It’s not about value, or growth, or low volatility; it’s about identifying companies that are already on an upward trajectory.
  • Why it’s a “complement”:
    • Momentum Factor: This isn’t just a random pick. Momentum is a well-documented factor in academic finance. The idea is that trends persist. As someone who’s delved deep into quantitative strategies, the momentum factor often offers periods of outperformance, albeit with higher volatility.
    • Tactical Edge: While ACWX gives you passive, broad exposure, IDMO is actively (or semi-actively, through its index methodology) seeking to capture alpha – that extra return above what the market gives you. It’s like putting a performance engine into your reliable chassis.
    • Developed Markets Focus: Notice it’s “International Developed Momentum,” meaning it excludes emerging markets. This provides a slightly less volatile, but still potent, momentum play compared to a global momentum fund that includes the often-swingy emerging markets.
    • Potential for Outperformance (with a caveat): In periods where the momentum factor is performing well, IDMO could provide a boost to your overall international allocation. The jury’s still out on how momentum will perform in every cycle, but it’s a compelling strategy for those willing to accept its inherent risks.

Last month, I was working on a portfolio for a client who already had solid core international exposure, but wanted to explore ways to potentially enhance returns without going too far out on a limb with individual stocks. IDMO was one of the options we discussed, specifically because it offers a systematic way to tap into a well-researched factor.

The Symphony of Two: Core & Complement in Action

So, how do these two work together? It’s a classic “core-satellite” approach tailored for international exposure.

  1. ACWX is your core: It’s your large, diversified, relatively low-cost foundation that provides broad exposure to global markets ex-US. This is your baseline, your anchor.
  2. IDMO is your satellite: It’s a smaller, more tactical allocation designed to potentially enhance returns by focusing on a specific factor (momentum). It adds a layer of sophistication and aims for alpha without requiring you to constantly pick stocks.

My take? If you allocate, say, 70-80% of your ex-US equity allocation to ACWX, and then 20-30% to IDMO, you’re getting the best of both worlds. You’re broadly diversified, covering thousands of companies globally, and you’re systematically targeting a known market anomaly. It’s a more nuanced approach than just “buy a global fund,” and as someone who’s spent years thinking about how to optimize portfolios, this kind of thoughtful combination excites me.

Quick Q&A Over Coffee

  • “Isn’t momentum risky? What if the market shifts?” You’re absolutely right to ask! Momentum strategies can be volatile and are prone to sharp reversals when trends suddenly change (think market crashes or sudden policy shifts). That’s precisely why I suggest it as a complement (a smaller satellite holding) and not your entire international allocation. ACWX provides the stability.
  • “Why not just pick individual foreign stocks?” You could, but honestly, that’s a full-time job for a research analyst. The diversification benefits and lower costs of ETFs like ACWX and IDMO make them far more practical for most investors, even seasoned ones. Trying to beat these broad, factor-based ETFs consistently with individual stock picks is incredibly difficult and often more expensive after transaction costs.
  • “Are these suitable for everyone?” No, definitely not. As a financial analyst, I’d always say: this strategy, like any, needs to align with your personal risk tolerance, investment horizon, and overall financial goals. If the thought of a more tactical, potentially volatile fund like IDMO makes you nervous, then sticking to a broad, plain-vanilla index like ACWX (or even an ACWI fund that includes the US) might be a better fit. My job is to present options, but your comfort is key.

My Honest Takeaway

Look, building a resilient, growth-oriented portfolio isn’t about finding the next hot stock or chasing fads. It’s about thoughtful construction, diversification, and understanding the levers you can pull. ACWX gives you an incredibly solid, low-cost way to get truly global diversification outside the US. And IDMO? It’s a smart, research-backed way to potentially supercharge a portion of that international exposure by systematically riding market trends.

I might be wrong about the timing of the next global market shift, but what I’m not wrong about is the enduring value of proper diversification and smart factor exposure. This combination isn’t a guaranteed get-rich-quick scheme (nothing is, despite what some influencers tell you), but it is, in my professional opinion, a very sensible, robust way to approach your international equity allocation. It’s about building a portfolio that’s ready for whatever the global economy throws at it, with a little extra zip when conditions allow.

About Sarah Miller: Financial analyst and investment researcher with 10+ years in financial markets and investment analysis. Contact | More about our team

Analysis based on financial research and market experience. Not personalized financial advice - consult professionals before investing.