Vanguard Total Stock Market ETF vs iShares Core MSCI Emerging Market ETF: Is VXUS or IEMG the Better Buy Right Now?

iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) provides targeted exposure to developing economies with a significant technology tilt, whereas the Vanguard Total International Stock ETF (NASDAQ:VXUS) offers broad-based, low-cost diversification across both developed and emerging international markets.

These funds represent two distinct approaches to international investing. One serves as a comprehensive solution for non-U.S. equity exposure, while the other focuses on the high-growth, higher-volatility potential of emerging nations. This comparison explores which strategy may best suit an investor's specific geographic preferences and risk tolerance.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the July 2 closing price.

The Vanguard fund remains one of the most affordable international options with a 0.05% expense ratio. While both ETFs provide income, the Vanguard fund currently offers a higher payout than the iShares alternative, which costs 0.09% annually. This yield gap of 0.35 percentage points may influence income-focused investors.

Performance & risk comparison

What's inside

The iShares Core MSCI Emerging Markets ETF aims to closely track an index of investible stocks, encompassing large-, mid-, and small-cap companies across developing global economies. Its portfolio leans heavily into Technology at 42%, followed by Financial Services at 17% and Consumer Cyclical at 9%. Its largest positions include Taiwan Semiconductor Manufacturing (TWSE:2330) at 12.9%, Samsung Electronics (KOSE:A005930) at 6.9%, and SK Hynix (KOSE:A000660) at 6%. The fund was launched in 2012. IEMG has paid $1.80 per share over the trailing 12 months, which, on its recent $79.84 share price, works out to a 2.2% yield.

Conversely, the Vanguard Total International Stock ETF tracks the FTSE Global All Cap ex U.S. Index, providing much broader coverage with 8,738 holdings. This includes companies in developed markets like Japan and the United Kingdom, which the iShares fund excludes. Sector weights are more balanced, including Financial Services at 22%, Technology at 21%, and Industrials at 16%. Its largest positions include Taiwan Semiconductor at 3.99%, Samsung 2.2%, and SK Hynix at 1.9%. The fund was launched in 2011. Vanguard Total International Stock ETF has paid $2.19 per share over the trailing 12 months, which, on its recent $84.84 share price, works out to a 2.5% yield.

Which fund is the better buy?

These are both sizable funds with relatively low expenses, although Vanguard’s is notably lower than iShares’.

One major difference lies in their geographic focus. The Vanguard Total International Stock ETF — VXUS — is 82% in developed-world stocks, with the balance primarily in emerging markets. Its top country-level holdings are Japan (15.2%), Taiwan (8.6%), and Canada (7.8%).

IEMG, by comparison, is 52% developed markets outside the U.S., 1% in the U.S., and 47% in emerging markets. The iShares Core MSCI Emerging Markets ETF is actually more heavily invested in large-cap stocks despite its greater weighting in emerging markets, at 83% large caps compared to 80% for VXUS.

For investors, probably the primary differentiator is performance. Here, IEMG has performed well over the past three years, outperforming VXUS in the 3-year lookback, with a total annualized return of 22.6% versus 18.7%. The Vanguard fund wins the 5-year time frame, with an 8.8% annualized return compared to IEMG’s 7.5%. The iShares fund, however, bests Vanguard in the 10-year lookback, at 10.1% to 10%.

Strong performance makes the iShares Core MSCI Emerging Markets ETF have a slight edge over the Vanguard Total International Stock Market ETF.

For more guidance on ETF investing, check out the full guide at this link.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.