SPDW vs VWO: Two International ETFs Face Off, but One Offers a Better Mix of Income and Growth for Long-Term Investors

State Street SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) offers lower-cost exposure to mature international economies, while Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) targets higher-growth potential in developing nations.

These funds serve different roles in an international portfolio. The Vanguard FTSE Emerging Markets ETF focuses on emerging markets, which are often more volatile but provide access to rapidly growing economies. The State Street SPDR Portfolio Developed World ex-US ETF provides broad coverage of developed nations outside the U.S., offering more stability and a lower price point.

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.

The State Street SPDR Portfolio Developed World ex-US ETF is the more affordable choice with a 0.03% expense ratio compared to 0.06% for the Vanguard fund. Additionally, the State Street fund offers a higher payout for income-seeking investors.

Performance & risk comparison

What's inside

The State Street SPDR Portfolio Developed World ex-US ETF focuses on developed economies outside the U.S. such as Japan, South Korea, Canada, and the United Kingdom. The fund offers broad exposure with over 2,400 holdings. Its largest sector allocations include Financials at 24%, Industrials at 18%, and Information Technology at 15%. The fund's largest positions include Samsung Electronics (OTC:SSNLF) at 2.38%, SK Hynix (NASDAQ:SKHY) at 2.00%, and ASML Holding (NASDAQ:ASML) at 1.95%. It was launched in 2007 and has paid $1.52 per share over the trailing 12 months, which on its recent ~$49.06 share price works out to a 3.04% yield.

The Vanguard FTSE Emerging Markets ETF targets developing nations like China, Brazil, and Taiwan, holding a much larger basket of more than 6,500 securities. This fund is heavily weighted toward Technology at 36% and Financials at 20%. Top holdings include Taiwan Semiconductor Manufacturing (NYSE:TSM) at 15.72%, Tencent Holdings (SEHK:0700) at 2.81%, and Alibaba Group Holding (NYSE:BABA) at 2.11%. It was launched in 2005 and has paid $1.22 per share over the trailing 12 months, which on its recent ~$56.84 share price works out to a 2.2% yield.

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Which looks like the better buys

My pick would be the Vanguard FTSE Emerging Markets ETF for long-term investors, despite the greater volatility. The current economic backdrop presents risks for both funds, but Vanguard's offers stronger exposure to two potential drivers of international equity returns: faster economic growth and continued investment in artificial intelligence (AI).

Emerging markets are projected to grow at a faster rate than developed counterparts in the coming years and not to mention, demand for AI infrastructure continues to support semiconductor companies based in emerging Asian markets. That favors Vanguard's substantial technology exposure and its large position in Taiwan Semiconductor Manufacturing.

State Street's developed-markets ETF remains attractive for investors prioritizing diversification, dividend income, and lower fees. It also offers some exposure to the AI supply chain through Samsung, SK Hynix, and ASML, but its broader sector allocation makes it less dependent on technology earnings.

The biggest risk to Vanguard is its concentration in Taiwanese technology companies, alongside China's economic challenges, geopolitical tensions, and uncertainty surrounding global interest rates. These risks are more short-term in nature which is why a longer investment horizon is needed in order to tolerate some significant price swings.

State Street remains a compelling choice for investors seeking steadier international exposure, but Vanguard offers greater potential for returns over the coming years.

RJ Fulton has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Taiwan Semiconductor Manufacturing, Tencent, and Vanguard FTSE Emerging Markets ETF. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.