This Low-Cost ETF Holds Almost 8,800 Stocks Across Both Developed and Emerging Markets. Here's Why It's a Compelling Long-Term Core Holding
Key Points
The Vanguard Total International Stock ETF is one of the most diverse ways to get international exposure in your portfolio.
The ETF has a low 0.05% expense ratio and owns thousands of stocks.
It has excellent total return potential and helps diversify a portfolio of U.S. equities.
- 10 stocks we like better than Vanguard Total International Stock ETF ›
It can be a great idea for investors to add international exposure to their stock portfolios -- especially if they're currently invested in mostly U.S.-based companies. And a great way to do it is with a low-cost index fund like the Vanguard Total International Stock ETF (NASDAQ: VXUS).
What does the Vanguard Total International Stock ETF invest in?
As the name suggests, this is an index fund that invests in international stocks. As a quick note, a global ETF invests in stocks worldwide, including U.S. stocks. International stock ETFs specifically exclude the U.S.
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The Vanguard Total International Stock ETF tracks a broad index. It owns nearly 8,800 different stocks. Companies of all sizes are represented, as are both developed and emerging markets. It is a weighted ETF, meaning larger companies carry more weight, but it certainly isn't top-heavy. Only three companies make up more than 1% of the fund's assets.
Also, don't assume that because it's an international ETF that it's filled with companies you've never heard of. Top holdings include tech heavyweights Taiwan Semi (NYSE: TSM) and Samsung, and you'll also find AstraZeneca (NYSE: AZN), Alibaba (NYSE: BABA), and other household names among the largest holdings.
Like most Vanguard ETFs, the Vanguard Total International Stock ETF is an inexpensive way to invest. It has a 0.05% expense ratio, which means that for every $10,000 in assets, your annual investment costs will be just $5. (Note: This isn't a fee you have to pay. It will simply be reflected in the fund's performance.)
A smart time to buy?
There are two big reasons to consider the Vanguard Total International Stock ETF right now. The first is to diversify your portfolio, as international stocks can protect against currency fluctuations, U.S.-specific economic headwinds, and more.
The second reason is that international stocks, as a group, trade at a significant discount to their U.S. counterparts. For example, the average stock in this ETF trades at about 17 times earnings, compared to an average price-to-earnings multiple of more than 25 for the U.S.-based Vanguard Total Stock Market ETF (NYSEMKT: VTI).
In a nutshell, the Vanguard Total International Stock ETF provides diversification at an attractive price. If you don't yet have enough non-U.S. exposure, it could be worth a closer look. Investors have nearly $600 billion allocated to this index fund, and there's a good reason why.
Should you buy stock in Vanguard Total International Stock ETF right now?
Before you buy stock in Vanguard Total International Stock ETF, consider this:
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Matt Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AstraZeneca Plc and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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