We have been advocating for Freedom Investing since 2004. Every year, The Heritage Foundation evaluates all of the world’s countries using their Index of Economic Freedom, where a high score correlates to nearly every positive measure of a country. We then use this ranking and efficient frontier analysis to craft our Foreign Stock investment strategy that we call “Freedom Investing.”

This article is part of my series where I review how Freedom Investing performs for the quarter.

About Return Data

In this analysis, I have used the actual products we are investing in rebalanced monthly to our static asset allocation targets with returns ending December 31, 2024. This analysis does not reflect our dynamic tilt or our individual stock foreign health care strategy, both of which we implement in client portfolios.

For comparison, I included the actual products of VEA, VWO, and ACWX. These ETFs represent a simple baseline for the relevant category. The Vanguard FTSE Developed Markets (VEA) can be compared to Developed Freedom Investing, Emerging Market (VWO) can be compared to Emerging Market Freedom Investing, and the All World ex-US (ACWX) can be compared to the Overall Freedom Investing.

Followers of this series will notice that I changed the developed market comparison ETF this quarter from iShares MSCI EAFE ETF (EFA) to Vanguard FTSE Developed Markets ETF (VEA). The reason for this is that this quarter represents the first full 12-month period of South Korea being categorized as a developed market (as FTSE does) rather than as an emerging market (as MSCI does). You can read about those changes in “2024 Index of Economic Freedom Update.”

I have also included some indexes. These indexes represent theoretical returns of a particular strategy. While they are unburdened by fees, I have selected the Net Return (NR) reporting for the index. The Net Return indicates that Morningstar has approximated the minimum possible dividend reinvestment, after deduction of some tax withholding. For those, MSCI EAFE Equal Country Weighted NR USD can be compared to Developed Freedom Investing, and MSCI EM Equal Country Weighted NR USD can be compared to Emerging Market Freedom Investing.

Lastly, I have also included the performance of the developed countries currently excluded from our Freedom Investing strategy to provide additional context.

Overview

Last quarter, we saw that in 1-year returns ending September 30, 2024, Developed Freedom Investing had a -0.29% disadvantage, Emerging Market Freedom Investing had a -4.36% disadvantage, and Overall Freedom Investing had a -1.53% disadvantage.

This quarter, we saw that in 1-year returns ending December 31, 2024, Developed Freedom Investing had a -3.37% disadvantage, Emerging Market Freedom Investing had a -7.20% disadvantage, and Overall Freedom Investing had a -3.96% disadvantage.

In 1-year returns ending December 31, 2024, Emerging Markets outperformed Emerging Markets ex-China by 10.1%.

You can find our articles reviewing the performance of Freedom Investing here.

	Ticker	3-Month	6-Month	9-Month	1-Year
MSCI EAFE Equal Country Weighted NR USD	—	-8.28%	-0.36%	1.47%	4.64%
Vanguard FTSE Developed Markets ETF (Market Return)	VEA	-8.09%	-1.52%	-2.08%	3.16%
Developed Freedom Investing		-9.92%	-4.23%	-2.18%	-0.21%
Austria	EWO	-5.59%	-1.39%	3.61%	4.13%
Denmark	EDEN	-15.99%	-15.15%	-11.80%	-3.91%
Finland	EFNL	-13.42%	-6.52%	-3.17%	-5.24%
Germany	FLGR	-6.13%	4.12%	2.69%	10.65%
Ireland	EIRL	-13.41%	-7.76%	-13.27%	-1.62%
Netherlands	EWN	-11.77%	-10.66%	-8.28%	1.69%
New Zealand	ENZL	-7.35%	0.71%	1.42%	-4.87%
Norway	ENOR	-6.66%	-6.23%	1.21%	-2.53%
Singapore	EWS	1.22%	16.77%	24.36%	22.10%
Sweden	EWD	-14.01%	-7.25%	-5.08%	-3.90%
Switzerland	FLSW	-11.33%	-3.88%	-0.83%	-1.75%
South Korea	FLKR	-17.62%	-20.15%	-21.21%	-18.83%
	Ticker	3-Month	6-Month	9-Month	1-Year
MSCI EM Equal Country Weighted NR USD	—	-6.92%	0.59%	1.30%	2.29%
Emerging Markets Freedom Investing		-6.49%	-2.13%	0.90%	3.38%
Emerging Markets	VWO	-5.75%	3.36%	8.71%	10.58%
Emerging Markets ex-China	XCEM	-6.90%	-4.71%	-2.20%	0.48%
Taiwan	FLTW	-0.47%	-1.31%	9.95%	16.67%
Chile	ECH	-7.91%	-2.89%	-2.99%	-8.63%
Mexico	FLMX	-11.81%	-16.40%	-30.30%	-28.48%
	Ticker	3-Month	6-Month	9-Month	1-Year
Overall Freedom Investing		-8.73%	-3.49%	-0.92%	1.24%
iShares MSCI ACWI ex US ETF (Market Return)	ACWX	-7.53%	-0.42%	0.56%	5.19%
Other Developed Countries Not In Freedom Investing	Ticker	3-Month	6-Month	9-Month	1-Year
Australia	FLAU	-10.89%	-0.69%	0.46%	1.82%
Belgium	EWK	-11.33%	0.48%	0.73%	0.18%
Canada	FLCA	-1.31%	10.95%	8.29%	13.01%
France	EWQ	-10.52%	-4.32%	-10.68%	-5.59%
Hong Kong	FLHK	-8.13%	9.22%	9.62%	-0.37%
Israel	EIS	14.92%	27.81%	22.71%	34.48%
Italy	EWI	-6.26%	1.87%	-0.78%	10.30%
Japan	FLJP	-5.03%	0.46%	-3.46%	7.03%
Portugal	MSCI Benchmark	-18.56%	-10.87%	-4.46%	-17.26%
Spain	EWP	-9.73%	2.01%	0.67%	5.77%
United Kingdom	FLGB	-6.44%	1.60%	4.69%	8.79%

 

For more information about Freedom Investing, you may enjoy reading “A 25-Year Review of Freedom Investing” or “Risk-Return Analysis of Freedom Investing.”

Photo of Singapore by Hu Chen on Unsplash. Image has been cropped. Returns data gathered from Morningstar Advisor Workstation.