How to build an international portfolio with little money

If you look at the apps on your phone, the car in your driveway, or the clothes in your closet, you will notice a pattern: your life is global. You drive a Toyota (Japan), watch movies on a Sony TV (Japan), use skincare from L’Oréal (France), and perhaps take medicine made by Novartis (Switzerland).

Yet, when American investors look at their portfolios, they often see only one country: The United States.

This phenomenon is known as Home Country Bias. It is the tendency to invest only in what we know and see around us. While the US stock market is the largest and most robust in the world, it only represents about 60% of the global equity market. By ignoring the other 40%, you are effectively shopping in a supermarket but refusing to leave the produce aisle.

The common myth is that investing internationally is complicated, expensive, or requires a Swiss bank account and a monocle.

The truth? You can own a piece of the entire global economy today for the price of a takeout dinner. Thanks to modern financial tools, building a diversified international portfolio is cheaper and easier than ever before. In this guide, we will show you how to go global on a shoestring budget.

1. Why Leave the Safety of the US Market?

Before we discuss how to invest, we must address the elephant in the room: Why bother? The S&P 500 has crushed international markets over the last decade. Why look elsewhere?

The Cycle of Winners

Financial markets move in cycles. While the US has dominated recently, this wasn’t always the case.

The 1980s: Dominated by Japan.
The 2000s: Emerging Markets and Europe outperformed the US significantly during the “Lost Decade” for US stocks.

Winners rotate. By holding only US stocks, you are betting that the American economy will be the sole winner forever. By diversifying internationally, you ensure that if the US market stays flat (or drops) while Europe or Asia booms, your portfolio can still grow.

The “Free Lunch” of Diversification

Harry Markowitz, the Nobel Prize-winning economist, called diversification “the only free lunch in finance.” Adding assets that don’t move in perfect lockstep with each other can actually lower your risk while maintaining potential returns. When Wall Street sneezes, other markets might not catch a cold.

2. The Magic Vehicle: Exchange Traded Funds (ETFs)

If you have a small amount of money (under $1,000), you cannot afford to go out and buy individual shares of Samsung, Nestle, and Alibaba. The trading fees and share prices would eat you alive.

The solution is the Exchange Traded Fund (ETF).

An ETF is like a basket. Inside that basket, a fund manager puts thousands of stocks from different countries. You can buy one share of that basket on the New York Stock Exchange just like you buy a share of Apple.

The “Total International” Approach

For the ultimate beginner, the easiest way to invest abroad is to buy a “Total International Stock Market” ETF.

Vanguard Total International Stock ETF (VXUS)
iShares Core MSCI Total International Stock ETF (IXUS)

Why this works:

With a single purchase (often costing less than $60 per share), you instantly own a slice of over 7,000 companies across Europe, Asia, Canada, and Emerging Markets. It excludes the US, making it the perfect companion to your existing US investments.

3. Developed vs. Emerging Markets: Understanding the Mix

When you step outside the US, the world is divided into two main categories. Understanding the difference is crucial for your risk management.

Developed Markets (The Stability)

These are countries with mature economies, stable governments, and established rule of law.

Examples: United Kingdom, Japan, Canada, France, Germany, Australia.
The Vibe: Slow and steady growth, reliable dividends, safer. Think of companies like Toyota, Shell, or SAP.
Allocation: Most “Total International” funds keep about 75% of their money here.

Emerging Markets (The Growth Engine)

These are nations with younger populations, faster-growing economies, but higher political and economic volatility.

Examples: China, India, Brazil, Taiwan, South Africa.
The Vibe: High risk, high reward. These countries are building infrastructure and have a rising middle class.
Allocation: Usually about 25% of an international fund.

Pro Tip for Small Accounts: If you are just starting, don’t try to pick winners between these two. Stick to a blended ETF that holds both.

4. The Power of “Fractional Shares”

4. The Power of "Fractional Shares"

Historically, if a share of an International ETF cost $60 and you only had $20, you were out of luck. You couldn’t invest.

That barrier has been demolished by Fractional Shares.

Modern brokerages (like Fidelity, Schwab, Robinhood, or M1 Finance) allow you to buy dollar amounts of a stock rather than share amounts.

You have $10.
The ETF costs $100.
You buy 0.1 shares.

This is the key to building a portfolio with little money. You can literally take $50 and split it: $30 into US stocks and $20 into International stocks. Every dollar is put to work immediately.

5. American Depositary Receipts (ADRs): Cherry-Picking Stocks

What if you don’t want a generic fund? What if you really believe in a specific foreign company, like Sony or TSMC (Taiwan Semiconductor)?

You don’t need a Japanese or Taiwanese brokerage account. You can use ADRs.

An American Depositary Receipt (ADR) is a certificate issued by a US bank that represents shares in foreign stock. The trade happens in US dollars, on US exchanges, during US trading hours.

Warning for Small Investors:

Buying individual stocks carries “Single Company Risk.” If you only have $500 to invest, putting it all into one Brazilian oil company or one Chinese tech firm is gambling, not investing. ADRs are great, but for beginners, ETFs are safer.

6. Dealing with Currency Risk (The Double-Edged Sword)

When you invest internationally, you are actually making two bets:

The Company Bet: That the businesses will make a profit.
The Currency Bet: That the foreign currency will stay strong against the US Dollar.

If you buy a German stock, you technically own an asset priced in Euros.

If the Euro rises against the Dollar: You make extra money when you convert it back.
If the Euro falls against the Dollar: You lose value, even if the stock price stayed flat.

Should you worry about this?

For a long-term investor with a small portfolio, no. Currency fluctuations tend to wash out over 20 or 30 years. In fact, holding foreign currency assets is a hedge against the decline of the US Dollar. It protects your purchasing power globally.

7. The Tax Man Cometh: The Foreign Tax Credit

This is a specific detail for US investors that many blogs overlook.

When a foreign company pays you a dividend, their home government often takes a cut before the money even leaves their country. This is called Foreign Withholding Tax.

For example, if you own a French company, France might keep 15% of your dividend. Then, the IRS (Uncle Sam) wants to tax you on that income too.

The Good News:

The US government does not want you to be double-taxed. You can usually claim a Foreign Tax Credit (Form 1116) on your tax return.

If you hold these investments in a standard taxable brokerage account, you get the credit.
Pro Tip: If you hold international funds in an IRA or 401(k), you generally cannot claim the credit (because you aren’t paying US taxes on it yet), but you still lose the foreign withholding.

Does this mean you shouldn’t put international stocks in an IRA? Not necessarily. The tax drag is small (usually around 0.20% to 0.30% annually). Don’t let tax optimization paralyze you. The most important thing is simply being invested.

8. Sample Portfolios: Where to Start

How do you actually construct this? Here are three simple models based on your risk tolerance and interest.

Option A: The “One-and-Done” (Simplest)

Hold: A “Total World Stock” ETF (like VT – Vanguard Total World Stock).
Strategy: This single fund holds US and International stocks in the exact proportion of the global market (approx. 60% US / 40% International).
Cost: One ticker symbol, total diversification.

Option B: The “Classic Boglehead” (Three-Fund Portfolio)

50% Total US Stock Market (e.g., VTI)
30% Total International Stock Market (e.g., VXUS)
20% Total Bond Market (e.g., BND)
Strategy: You manually control how much international exposure you want. If you feel 40% is too high, you can dial it down to 20% or 30%.

Option C: The “Regional Specialist” (Advanced)

Hold: Specific regional ETFs.
Examples: Europe ETF (VGK), Emerging Markets ETF (VWO), Pacific ETF (VPL).
Strategy: Only for those who want to overweight specific regions (e.g., betting heavily on India or Europe). This requires more research and rebalancing.

9. Common Pitfalls to Avoid

As you venture overseas with your capital, watch out for these traps.

Trap 1: Chasing Past Performance

“The US market did better last year, so I’ll just buy that.”

This is investing by looking in the rearview mirror. You invest for where the puck is going, not where it has been. Valuations in international markets are currently much lower (cheaper) than in the US, which implies higher expected future returns.

Trap 2: Geopolitical Panic

International markets can be scary. Wars in Europe, trade tensions in Asia, or political instability in South America can cause stocks to drop.

Remember: Volatility is the price you pay for performance. Do not panic sell because of a headline. The global economy is resilient.

Trap 3: High Fees

Some “Global Mutual Funds” charge high expense ratios (1% or more) because they claim to have “expert managers” picking stocks.

Avoid these. Stick to passive Index ETFs. The expense ratio for a fund like VXUS is around 0.07%. Never pay high fees for international exposure.

10. Your Passport to Wealth

Building an international portfolio with little money is no longer a challenge; it is a choice.

With as little as $50, a brokerage app, and the knowledge of fractional shares and ETFs, you can transform from a local investor into a global capitalist.

By stepping beyond the US borders, you are not betting against America; you are betting on human ingenuity worldwide. You are ensuring that no matter which country discovers the next cure for cancer, invents the next battery technology, or builds the next great car, your wealth will grow along with it.

The world is a big place. Your portfolio should reflect that.

Frequently Asked Questions (FAQ)

Is it risky to invest outside the US?

Yes and no. International markets can be more volatile due to political risks and currency swings. However, holding only US stocks is also risky (Concentration Risk). Adding international stocks actually reduces the overall long-term risk of your portfolio through diversification.

How much of my portfolio should be international?

Financial advisors typically recommend between 20% and 40%. Vanguard, one of the world’s largest investment firms, suggests allocating at least 20% to international equities to capture the benefits of diversification.

Can I just buy Coca-Cola and McDonald’s to get international exposure?

This is a common argument, as these companies sell globally. However, it is flawed. While they sell abroad, they are still subject to US laws, US tax codes, and the US economy. They do not give you exposure to foreign banking, foreign real estate, or local industries that don’t exist in the US. You need actual foreign companies to be truly diversified.