Fact checked by Yarilet Perez
The Vanguard Total International Stock ETF (NASDAQ: VXUS) is an international exchange-traded fund (ETF) launched in 2011. VXUS has earned investors an annualized return of 4.97% since its inception by tracking the performance of global company stocks listed on the FTSE Global All Cap ex U.S. Index. The target benchmark index follows large-, mid-, and small-cap equities of companies operating outside the United States.
The international equities held within VXUS provide investors with a unique opportunity to diversify a portfolio in both developed and emerging markets around the world. The stock movement of companies based overseas doesn’t always have a direct correlation to domestic stock prices, providing investors with an opportunity to take advantage of market movements that may differ from shifts in U.S. equity markets.
The Vanguard Total International Stock ETF invests in an attempt to mimic the performance of the FTSE Global All Cap ex U.S. Index. VXUS is most heavily weighted in Europe with 40.40% invested in the region, followed by 26.30% in the Pacific, 25.70% in emerging markets, and 7.20% in North America. Top holdings follow suit with the fund’s target index, including Taiwan Semiconductor Manufacturing Co., Novo Nordisk, Tencent Holdings, and Nestlé.
Key Takeaways
- Vanguard Total International Stock ETF (NASDAQ: VXUS) has earned investors an annualized return of 4.97% since its inception in 2011.
- VXUS is managed by the Vanguard Group which is widely known for its expertise in providing investors access to low-cost ETFs.
- VXUS tracks the performance of global company stocks listed on the FTSE Global All Cap ex U.S. Index which follows large-, mid-, and small-cap equities of companies operating outside the United States.
- The stock movement of companies based overseas doesn’t always have a direct correlation to domestic stock prices.
- VXUS is most heavily weighted in Europe followed by the Pacific, emerging markets, and North America.
VXUS Characteristics
VXUS is managed by the Vanguard Group which is known widely for its expertise in providing investors access to low-cost ETFs. VXUS implements a passive management investment strategy that’s based on a full replication approach that assists in keeping the total expense ratio passed on to investors at 0.08%, well below the sector average for comparable ETFs.
The Vanguard Total International Stock ETF can be bought and sold in the secondary market like other ETFs and individual stocks with or without the help of a broker.
Important
The expense ratio for VXUS is impressively low but other fees associated with trading vary depending on which platform the investor uses, including broker commissions.
VXUS Suitability
VXUS isn’t an appropriate holding for every investor because it carries with it more risk than other broadly focused funds that include additional asset classes or a combination of domestic and international equities. Investors adding VXUS to a portfolio are exposed to the risks inherent in international investing, including emerging country risk, political risk, market risk, and currency risk.
Each of these factors can have a drastic effect on international stock holdings like those included in the VXUS company roster. This may result in the fund experiencing greater volatility than other ETFs.
How Does an Active Management Strategy Work?
Active management involves turning the reins of your investment decisions over to a professional fund manager. The manager has total control over your trades or lack thereof. The theory is that this justifies the extra costs involved in working with them.
What Is the Average Expense Ratio?
The average expense ratio can depend on what you’re investing in and trading. ETF average expense ratios can range from 0.10% to 10% and some can be even higher. Anything below 0.25% is generally considered low cost. ETF fees tend to be higher than those associated with mutual funds.
What Are the Risks of International Investing?
International investing isn’t for the faint of heart. Risks include possibly working with an investment advisor or broker who isn’t registered with and subject to the regulations of the U.S. Securities and Exchange Commission. It can also result in higher costs. International investments can also be vulnerable to social, economic, and political factors in other countries that a U.S. investor might not even be aware of.
The Bottom Line
VXUS is most appropriate as a small percentage of a comprehensive, diversified portfolio for investors seeking growth over a long-term horizon. A high level of volatility can be experienced in the international market so investors with a high tolerance for risk may find this ETF suitable as an international allocation.
VXUS held $453.3 billion in net assets and 8,667 stocks within the fund across a broad range of large-, mid-, and small-cap companies as of August 2024, however. This can help reduce the total risk investors face when adding this ETF to a portfolio.
Disclosure: Investopedia does not provide investment advice. Investors should consider their risk tolerance and investment objectives before making investment decisions.