Vanguard VEA vs. State Street SPDW: Which Developed Markets ETF Wins This Tight Race?

Vanguard FTSE Developed Markets ETF (NYSEMKT:VEA) and State Street SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) offer nearly identical low-cost exposure to developed markets outside the U.S. with minor differences in yield and diversification.

Investors seeking international diversification often look to developed markets to balance domestic portfolios. Both the Vanguard fund and the State Street fund provide comprehensive coverage of Europe, Canada, and the Pacific region. By excluding U.S. equities, these funds allow for targeted exposure to mature economies, which can help in diversifying and potentially reducing country-specific investment risks within a broader portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

These ETFs are among the most affordable options in the international category, with both providers charging an identical expense ratio of just 0.03%. While the cost of ownership is the same, the State Street fund provides a higher payout, offering a 3% yield compared to 2.4% for the Vanguard fund.

Performance & risk comparison

What's inside

Vanguard FTSE Developed Markets ETF focuses on financial services at 24%, industrials at 18%, and technology at 16%. It holds 3,895 stocks, and its largest positions include Samsung Electronics at 2.6%, SK Hynix at 2%, and ASML Holding NV at 1.9%. The fund was launched in 2007. It has paid $1.70 per share over the trailing 12 months, which on its recent ~$71.13 share price works out to a 2.4% yield.

State Street SPDR Portfolio Developed World ex-US ETF maintains similar sector weightings with financial services at 24%, industrials at 18%, and technology at 15%. Its top holdings include Samsung Electronics at 2.8%, SK Hynix at 2.2%, and ASML at 2.1%. With 2,434 holdings, it is less diversified than its peer. It was launched in 2007. It has paid $1.52 per share over the trailing 12 months, which on its recent ~$50.56 share price works out to a 3% yield.

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Which looks like the better buy

There are a lot of similarities between VEA and SPDW, and for investors seeking exposure to funds that hold international stocks outside of the U.S., both appear to be good, low-cost options.

VEA is the larger fund, both by assets under management and number of holdings, which gives it it better liquidity and more diversification into small- and mid-cap international stocks. That said, while they share the same top-three holdings, VEA is slightly more concentrated in them than SPDW. VEA's max drawdown over five years is also slightly less severe than SPDW's, and its total return over that time is marginally higher. However, SPDW offers a higher dividend yield at 3%, nearly triple the current offering from the S&P 500.

Investors looking to maximize breadth in their international holdings may be drawn to VEA's wider overall portfolio and greater exposure across market caps. Those seeking a slightly higher dividend yield could be swayed by SPDW.

Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Vanguard FTSE Developed Markets ETF. The Motley Fool has a disclosure policy.