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 September 30, 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 EFA, VWO, and ACWX. These ETFs represent a simple baseline for the relevant category. The EAFE (EFA) 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.

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.

Investment Strategy Notes

In March 2024, our Investment Committee updated our Freedom Investing strategy for the new 2024 Index of Economic Freedom and updated our Emerging Market strategy. For the purposes of this model, those changes are assumed to have been implemented during the March 1, 2024 rebalancing. This includes reclassifying South Korea from an emerging market to a developed market. You can read about those changes in “2024 Index of Economic Freedom Update” and “Updates to Our Emerging Markets Strategy (March 2024).”

Overview

Last quarter, we saw that in 1-year returns using the dynamic tilt and ending June 30, 2024, Developed Freedom Investing had a -0.14% disadvantage, Emerging Market Freedom Investing had a -0.02% disadvantage, and Overall Freedom Investing had a +0.36% advantage.

This 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.

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

	Ticker	3-Month	6-Month	9-Month	1-Year
iShares MSCI EAFE ETF (Market Return)	EFA	6.77%	6.57%	12.95%	25.05%
MSCI EAFE Equal Country Weighted NR USD	—	8.64%	10.63%	14.09%	26.44%
Developed Freedom Investing		6.31%	8.59%	10.78%	24.76%
Australia	FLAU	11.45%	12.73%	14.26%	31.01%
Austria	EWO	4.46%	9.75%	10.30%	24.98%
Denmark	EDEN	1.00%	4.99%	14.37%	28.01%
Finland	EFNL	7.97%	11.84%	9.45%	22.94%
Germany	FLGR	10.92%	9.40%	17.87%	33.63%
Ireland	EIRL	6.52%	0.17%	13.62%	28.87%
Netherlands	EWN	1.25%	3.95%	15.24%	36.30%
New Zealand	ENZL	8.70%	9.46%	2.68%	14.77%
Norway	ENOR	0.47%	8.44%	4.43%	10.41%
Singapore	EWS	15.36%	22.87%	20.63%	26.68%
Sweden	EWD	7.85%	10.38%	11.75%	37.09%
Switzerland	FLSW	8.40%	11.84%	10.81%	23.05%
South Korea	FLKR	-3.06%	-4.36%	-1.47%	11.75%
	Ticker	3-Month	6-Month	9-Month	1-Year
MSCI EM Equal Country Weighted NR USD	—	8.07%	8.83%	9.90%	20.93%
Emerging Markets Freedom Investing		4.66%	7.90%	10.55%	21.27%
Emerging Markets	VWO	9.67%	15.34%	17.33%	25.63%
Emerging Markets ex-China	XCEM	2.35%	5.05%	7.93%	20.64%
Taiwan	FLTW	-0.84%	10.47%	17.23%	36.33%
South Korea	FLKR	-3.06%	-4.36%	-1.47%	11.75%
Chile	ECH	5.45%	5.33%	-0.79%	7.55%
Mexico	FLMX	-5.20%	-20.97%	-18.90%	-4.86%
	Ticker	3-Month	6-Month	9-Month	1-Year
Overall Freedom Investing		5.75%	8.56%	10.93%	23.76%
iShares MSCI ACWI ex US ETF (Market Return)	ACWX	7.70%	8.76%	13.77%	25.30%
Other Developed Countries Not In Freedom Investing	Ticker	3-Month	6-Month	9-Month	1-Year
Belgium	EWK	13.31%	13.60%	12.97%	23.38%
Canada (Note: not included in EAFE)	FLCA	12.43%	9.72%	14.51%	28.47%
France	EWQ	6.93%	-0.17%	5.51%	16.91%
Hong Kong	FLHK	18.88%	19.32%	8.44%	13.09%
Israel	EIS	11.22%	6.78%	17.02%	26.60%
Italy	EWI	8.68%	5.85%	17.67%	32.90%
Japan	FLJP	5.77%	1.65%	12.69%	21.35%
Portugal	MSCI Benchmark	9.44%	17.31%	1.59%	15.35%
Spain	EWP	13.00%	11.52%	17.17%	32.53%
United Kingdom	FLGB	8.59%	11.89%	16.27%	24.84%

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 Sweden by Catalina Johnson on Unsplash. Image has been cropped. Returns data gathered from Morningstar Advisor Workstation.