The Vanguard Total International Stock ETF (VXUS) has been another gem in my long-term retirement portfolio alongside Vanguard Total Stock Market ETF (VTI). In the past, I also owned a small percentage of the Vanguard Emerging Markets ETF (VWO). If you analyze VXUS, you’ll notice that it contains 25.20% of Emerging Market stocks which is sufficient as per my risk requirements and exposure to emerging markets. I then sold VWO and added the money to VXUS.
What is VXUS?
VXUS is a broad market ETF (7776 stocks) which tracks the performance of the FTSE Global All Cap ex US Index. It consists of a well-diversified mix of stocks from developed nations as well as emerging markets. This ETF is great for those who want one fund with exposure to top equities in the world excluding US stocks.
How does VXUS fit in your portfolio?
A well-diversified stock portfolio needs stocks by varying market cap as well geographies. As I explained in my article on VTI, you can add world (excluding US) diversification to your portfolio by adding a certain % to VXUS. Ex: instead of investing in a target retirement fund, a 30 yr old investor can construct a simple 3 ETF portfolio using:
VTI (Vanguard Total Stock Market ETF) : 60%
VXUS (Vanguard Total International Stock ETF) : 30%
BND (Vanguard Total Bond Market ETF) : 10%
VXUS facts: as of 11/30/2021 – Source: Vanguard
Total number of stocks: 7776
Total fund assets: $402.0 billion
Low expense ratio of 0.08% which is $8 per year in fees for every $10,000 invested in VXUS.
The 10 largest stock holdings make up 9.6% of total net assets.
The largest region invested in is Europe: 40.20%
Average annual returns since inception (01/26/2011) is 5.23%
VXUS holdings, composition & performance – Source: Vanguard
What next?
If you add VXUS to your long-term portfolio, make sure that you continue to buy shares periodically so that you can leverage all the benefits of ‘dollar cost averaging’.
As time goes by, market fluctuations will cause the funds in your portfolio to occupy a bigger or a smaller percentage than your desired allocation. This can cause your overall portfolio to become imbalanced. Remember to rebalance your portfolio (every quarter or every 6 mths or yearly) so that the fund allocation fits your risk tolerance.
Vanguard funds are the best
Over a 10 yr period VXUS has returned just 6% avg annual returns compared to VTI which has returned more than double 13%. Why diversify?
US markets have had a good run over the past 10 yrs…that’s why you see higher than average returns. No one knows how long this will last and that’s why its good to diversity into international markets as well.
7000+ stocks…now thats one diverse fund.
My husband and I own this one too along with VTI. Vanguard has some great ETFs.
Had this one for a while along with VTI. The performance hasn’t been as great as VTI but who knows what the future holds…better to have international diversification.
Yes, past performance is not an indicative of future performance so better to diversify.
I get good dividends on this one every quarter.