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Fund Spy

Vanguard Total International Stock ETF Has It All

Outstanding diversification + rock-bottom fees = a core international stock ETF that works for most investors.

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Vanguard Total International Stock ETF (VXUS) has few close rivals. Compared with its peers, it has one of the broadest portfolios and lowest expense ratios in the foreign large-blend Morningstar Category. That combination makes for an attractive long-term investment, earning a Morningstar Analyst Rating of Gold.

The fund tracks the FTSE Global All Cap ex U.S. Index, which includes stocks of all sizes from foreign developed and emerging markets. It weights them by market cap, an approach that benefits investors by capturing the market’s collective opinion of each stock’s value while keeping turnover low. Market-cap weighting can be tough to beat because the market tends to do a good job valuing stocks over the long term. Occasionally it will increase the fund’s exposure to expensive stocks when investors get excited about an area of the market. But this doesn’t undermine its long-term efficacy.

This is one of the broadest portfolios in the foreign large-blend category. Its exceptional diversification mitigates the impact of holding the worst-performing names. It holds more than 7,000 stocks and has only 9% of assets in its 10 largest positions. Its regional composition looks modestly different from a typical fund in the category because it has a larger dose of emerging-markets stocks. But their weight in the portfolio isn’t large enough to materially increase the fund’s risk or compromise its category-relative performance.

Performance has not distinguished this fund from its competitors. Despite its low fee advantage, the total return of the fund’s Admiral share class mildly outperformed the category average over the 10 years through November 2021. Its middling total return was driven by the lackluster performance of foreign markets, which performed poorly by historical standards over this decade. The fund’s broad portfolio and ultralow fees across all of its share classes should help it perform better within the category when foreign markets post stronger returns.

Key Proprietary Morningstar Metrics

Morningstar Analyst Rating: Gold
Process Pillar: High
People Pillar: Above Average
Parent Pillar: High

Daniel Sotiroff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.