Is Now the Time to Add an International ETF to Your Core Holdings?

The S&P 500 index has generated a total return of 329% in the past 10 years (as of May 21), translating to a fantastic 15.7% annualized gain. Even in 2026, despite heightened volatility earlier this year, the benchmark has climbed 8%. It trades near record highs.

Investors who historically bet on large U.S. businesses, a view that's essentially bullish on the progress of the American economy, have clearly done well. Companies like Nvidia, Apple, and Microsoft, whose share prices have soared, dominate the technology landscape.

But maybe investors should consider expanding their geographic reach. This is particularly true if they realize they have too much concentration in the S&P 500 constituents. Is it time for you to add an international exchange-traded fund (ETF) to your core holdings?

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Investors might consider increasing geographic diversification

A core holding might be a position that represents 5% or more of an investor's portfolio, and it's something that is planned to be held for at least five years. While its performance won't make or break someone's financial situation, it does support the idea of creating an adequately diversified portfolio.

Why would an investor consider owning an international ETF? I think there are three possible reasons that can drive this decision.

The first is that there are valid concerns about the valuation of the S&P 500 being elevated, which might portend weak returns. Another reason comes down to greater geopolitical turmoil that could result in the U.S. not being viewed as favorably on a global stage as it relates to capital flows. And lastly, the artificial intelligence (AI) boom might drive nations to keep their technological breakthroughs within their own borders.

This might be the best investment option

Investors who have decided to add greater exposure to international equities should consider the Vanguard Total International Stock ETF (NASDAQ: VXUS). It's offered by a reputable firm in Vanguard, which has a five-decade operating history and manages trillions of dollars in client assets.

Plus, it helps that this ETF charges an attractive expense ratio of just 0.05%. On a hypothetical $10,000 investment, only $5 goes to Vanguard in the first year. Investors keep more of their money over time.

The Vanguard Total International Stock ETF's performance lags the S&P 500, as the former has produced a total return of 155% in the past 10 years. However, it has outperformed over the trailing-12-month period.

The leading three positions in this ETF are Taiwan Semiconductor Manufacturing, Samsung Electronics, and ASML Holding. And the top country represented is Japan. Investors looking to own international companies should decide to make this ETF a core holding.

Neil Patel has positions in Vanguard Total International Stock ETF. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.