This has been a rough year for international equities and the relevant exchange traded funds, but with plenty of ex-US markets looking attractively valued, some investors may want to nibble at international ETFs in 2019.
A good way of accomplishing that objective is to seek broad-based, cost-effective exposure. Enter the Vanguard Total International Stock ETF (NASDAQ: VXUS). VXUS tracks the FTSE Global All Cap ex US Index and charges just 0.11% per year, making it cheaper than 89% of competing strategies, according to Vanguard data.
As is the case with many broad market Vanguard ETF, VXUS has a deep bench. The fund is home to nearly 6,400 stocks with a median market capitalization of $25 billion. Just over 21% of VXUS’s holdings are emerging market names.
“It covers the entire investable market outside of the U.S., giving investors access to stocks of all sizes,” said Morningstar in a note out Friday. “The exchange-traded fund’s ultralow expense ratio and market-cap-weighted approach curb the cost of ownership, providing it with a significant advantage over its more expensive rivals.”
Investing in international stocks, whether it be developed or emerging markets, can be tricky. Being properly diversified while avoiding single stock risk is crucial to skirting volatility and producing positive returns over the long-term. Investors who want overseas exposure but are less familiar with foreign companies can use international exchange traded funds to diversify a portfolio.
Looking Ahead
“Stocks listed in overseas markets can diversify a U.S.-centric portfolio,” said Morningstar. “The fund includes stocks listed in both developed and emerging markets and captures most of the available foreign market capitalization. Its market-cap-weighted approach emphasizes the largest firms in the portfolio.”
With weights ranging from 0.10% to 17.90%, 45 countries are represented in the VXUS lineup. Japan, the U.K. and China combine for 36.60% of the fund’s geographic exposure.
“The wide geographic reach of this portfolio provides access to a diverse range of countries and currencies,” according to Morningstar. “The fund has less exposure to European stocks than the category average and makes up for this difference with a greater allocation to those from emerging markets.”
With a price-to-earnings ratio of 12.70x, the Vanguard fund reflects the discounts available in equity markets outside the U.S.
Morningstar has a Gold rating on VXUS.
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