The United States is the world's leading economy, a position it has held for many years. That's probably not going to change anytime soon, but that doesn't mean things are rosy. Many American consumers are struggling financially, which could weigh on U.S. stocks.

I wouldn't bet against the U.S. economy over the long term, but it may be wise to diversify your investments and consider international markets for value and potential upside.

An exchange-traded fund (ETF) would be an ideal choice. It offers simple diversification with a single ticker symbol. Here are four reasons why the Vanguard FTSE Developed Markets ETF (VEA 0.27%) is my favorite international ETF and could be the smartest place to invest $100 right now.

1. It provides diverse exposure to the best non-U.S. companies

The Vanguard FTSE Developed Markets ETF comprises 3,873 holdings, predominantly consisting of large-cap companies located in countries like Japan, Canada, the United Kingdom, France, Germany, Switzerland, Australia, and South Korea, among others. Its top holdings include:

1. SAP
2. Nestlé
3. ASML Holding
4. Roche Holding
5. Shell 
6. AstraZeneca 
7. Novartis
8. Novo Nordisk
9. Toyota Motor
10. HSBC Holdings

This group alone includes some of the world's leading businesses in technology, consumer staples, energy, pharmaceuticals, automotive, and banking. No individual company represents more than 1.24% of the fund, ensuring genuine diversification. I also appreciate that the fund focuses on developed markets, so investors don't have to worry about the instability that can accompany investing in companies in emerging markets.

2. It's a compelling value relative to U.S. stocks

So, why invest now?

While the U.S. stock market, specifically, the S&P 500 index, which represents 500 of America's most prominent companies, has long been an outstanding investment, it could be due for a period of underperformance relative to the rest of the world. It's a fair argument that America's innovation and economic leadership warrant a premium versus the world's other stock markets, but that rubber band may have stretched too far.

As shown below, the S&P 500 is trading at nearly 5 times its book value. That's the highest since 1999, just before one of the worst U.S. stock market downturns in history. Meanwhile, the Vanguard FTSE Developed Markets ETF trades at just 1.7 times its book value today, a 65% discount!

Data by YCharts.

If you value the S&P 500 on earnings, its price-to-earnings ratio of 28 is also significantly above its historical norms. The Vanguard FTSE Developed Markets ETF trades at 15.5 times earnings today, a 44% discount. It's an enormous gap.

I'm not predicting that the S&P 500 will plummet, but the prolific success of the "Magnificent Seven" stocks, which dominate the S&P 500's top holdings, has influenced the S&P 500's valuation to some extent. It could be time for international stocks to shine for a bit. Remember, international large-cap stocks don't have to reach parity with their U.S. counterparts to outperform them.

3. Sentiment and money could favor international stocks

This shift could already be underway. Prices can go in one direction longer than you'd expect, but a catalyst eventually sparks change. The Trump administration has adopted a more America-first stance on trade policies. It represents a dramatic change from the status quo of open, global trade policies.

It's not my place to say whether that's a good or bad thing, or debate policy. However, such a dramatic pivot may have influenced global investors to evaluate and allocate more capital to non-U.S. companies.

The Vanguard FTSE Developed Markets ETF has outperformed the S&P 500 by approximately 16 percentage points in 2025:

Data by YCharts.

Politics are unpredictable, and tariffs and other policies will likely evolve. However, considering the S&P 500's broader valuation, the financial struggles of many U.S. consumers, and the current political and economic uncertainty, this trend might continue.

4. Low fees

Lastly, the Vanguard FTSE Developed Markets ETF costs very little to own. Its ETF expense ratio is only 0.03%. So, if you invest $100, three pennies of that will go to the fund's management team. That means you retain the vast majority of the money you invested, along with the returns it generates.

I don't mean to sound down on the U.S. stock market. I believe that the S&P 500 will continue to perform excellently over the long term. But if you're trying to maximize your investment returns in the short and medium term, the Vanguard FTSE Developed Markets ETF could be the smartest way to profit from the upside in international markets.