ETF of the Week: Vanguard FTSE All World ex-US Small-Cap ETF (VSS)

VettaFi’s vice chairman Tom Lydon discussed the Vanguard FTSE All World ex-US Small-Cap ETF (VSS) on this week’s “ETF of the Week” podcast with Chuck Jaffe of “Money Life.”

This marks the second Vanguard fund in a row featured on “ETF of the Week.” “You can’t ignore Vanguard,” Lydon said, noting that the reason this fund was selected has more to do with global markets having seemed to put in a low. Lydon observed that small-caps have been overperforming the market, adding, “If you’ve got money that’s on the sidelines and you’re wondering where to put it, it’s not all back into the S&P 500.”

According to Lydon, VSS takes advantage of not just ex-U.S. allocations, but small-cap allocations as well. “From a valuation standpoint, it’s less than a 9x from a P/E standpoint. It’s literally half priced compared to the S&P 500,” he shared. Jaffe added that Vanguard keeps its prices down, reducing any potential drag on this fund.

Lydon believes that VSS is a truly diversified allocation, boasting that, aside from the single-digit P/E, the fund is also just going above its uptrend, making the timing for exposure optimal. “There’s no guarantee that this uptrend is going to continue, but from a technical analysis standpoint and a pricing standpoint, this looks really attractive,” offered Lydon.

VSS is not only a 200-day moving average play, but international markets and small-caps could be primed for resurgence after the long domination of domestic stocks. Lydon pointed to the broad range of exposures and companies in VSS, saying, “If you don’t know where to go and you don’t want to pick the individual stocks, but you want to be diversified, this is a good allocation to take a look at.”

With market jitters still giving pause to some, Lydon remarked that waiting for people to fully feel confident about the markets could cause opportunities to slip away. “Most investors in the last 10 years had a correlation, in their stock allocations — whether it was stocks, ETFs, or mutual funds — to the S&P 500, and that worked really, really well. But eventually, the pendulum swings.”

Listen to the Whole Episode Covering VSS Here:

For more news, information, and analysis, visit the Fixed Income Channel.