Should You Add an International ETF to Your Portfolio in 2026?

In the stock market, U.S. stocks rightfully get much of the attention. They're routinely among the best-performing stocks, and most of the world's most valuable companies are American. If I could only invest in companies from a single country, it'd undoubtedly be the U.S., but luckily, I (and you) don't have to.

Having a diversified portfolio is key to minimizing risk and opening growth opportunities, and that includes investing in companies outside the U.S. There are plenty of options to choose from, but my favorite route is through the Vanguard Total International Stock ETF (NASDAQ: VXUS) because of how much ground it covers.

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As much ground as you can hope to cover with one ETF

VXUS holds 8,755 stocks across every non-U.S. region, including both developed and emerging markets. As of June 30, here's how the ETF was divided by region:

• Europe: 36%
  
• Pacific: 29.1%
  
• Emerging markets: 26.4%
  
• North America: 7.7%
  
• Middle East: 0.8%

Each country and region has its own set of pros and cons, so being able to invest in all of them simultaneously takes much of the research and guesswork out of it.

The top five represented countries are Japan, Taiwan, the U.K., Canada, and South Korea, led by tech companies such as Taiwan Semiconductor Manufacturing, Samsung, SK Hynix, ASML Holding, and Tencent Holdings. VXUS is truly the international one-stop shop.

VXUS's main purpose is to help investors hedge against overconcentration in U.S. stocks. Popular indexes, such as the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, have historically been among the best ways to invest in stocks, but they're composed almost entirely of U.S. companies. The S&P 500 and Dow Jones are both composed entirely of U.S. companies, and the Nasdaq Composite is 95% U.S. companies.

The U.S. has its own set of headwinds, including geopolitical tensions, inflation, and regulatory uncertainty. That doesn't detract from its long-term appeal, but it's nice to have an investment that isn't completely tied to those.

VXUS is an underrated income investment

An underrated part of VXUS is its attractive dividend. As of market close on July 17, its yield was 2.6%, slightly below its 3% average over the past five years. That yield is more than 2.5 times the S&P 500's current yield and is comparable to that of many popular dividend ETFs.

VXUS Dividend Yield data by YCharts

VXUS can be a complementary ETF that helps you hedge against U.S. concentration and provides a productive income asset for your portfolio. That's a win-win for an ETF as cheap (0.05% expense ratio) and broad as VXUS. I wouldn't expect it to outperform the U.S. market over the long term, but it could be a great support when the U.S. market or economy is in a downturn. It's definitely worth adding to your portfolio this year.

Stefon Walters has positions in Taiwan Semiconductor Manufacturing, Vanguard S&P 500 ETF, and Vanguard Total International Stock ETF. The Motley Fool has positions in and recommends ASML, Taiwan Semiconductor Manufacturing, Tencent, Vanguard Dividend Appreciation ETF, Vanguard High Dividend Yield ETF, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.