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ETF Specialist

A Compelling Option for International Small-Cap Exposure

This ETF's diversified portfolio and rock-bottom fee make it stand out.

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 Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) is one of the cheapest (0.17% expense ratio) and best diversified international small-cap stock portfolios available. It offers broad market-cap-weighted exposure to stocks listed in foreign developed and emerging markets. This approach promotes low turnover, effectively diversifies company-specific risk, and accurately represents its target market. Its large emerging-markets exposure has recently been a drag on performance, but over the long term this fund’s cost advantage should give it an edge over its foreign small/mid-blend Morningstar Category peers. It earns a Morningstar Analyst Rating of Silver.

This portfolio of over 3,400 holdings effectively diversifies company-specific risk. Its top 10 holdings account for less than 3% of assets, which is significantly lower than the 20% category average. Stocks domiciled in Canada and the United Kingdom dominate the fund’s top holdings, accounting for 24 of the fund’s top 25 holdings. Sector weightings are comparable to the category average except for industrials, which account for only 18% of this fund’s portfolio compared with 23% for the category average.

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Matthew Diamond does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.