Vanguard Total International Stock Index Fund ETF Shares VXUS

Vanguard Total International Stock Index’s market-cap-weighted portfolio holds nearly every stock from the international market. Its low fee and expansive portfolio make it one of the best international stock funds available.

The fund tracks the FTSE Global All Cap ex-US Index. It targets small-, mid-, and large-cap stocks from international emerging and developed markets, pulling in more than 8,000 names. The final portfolio weights its holdings by market capitalization. Market-cap weighting efficiently sizes holdings by harnessing the market's consensus opinion of each stock's relative value. Stocks that grow faster than peers take up a larger share of the portfolio, while struggling companies will have less importance.

Diversification is a strength of this portfolio, owing to its expansive target index. The fund holds thousands of stocks, with its 10 largest positions regularly accounting for around 10% of assets. Single stocks rarely represent more than 2% of the portfolio. Some of this fund’s largest holdings are Asia-listed conglomerates with diversified revenue streams and robust competitive advantages.

Including emerging-market stocks widens the scope of this fund relative to some peers. The average fund in the foreign large-blend Morningstar Category allocates around one-tenth of its portfolio to these stocks, while this fund is usually closer to double that. This larger allocation may give the fund a leg up, since emerging-market stocks historically have paid for their higher volatility with strong returns during market rallies. Those stocks’ recent struggles have hurt the fund’s category-relative performance.

Low fees have helped neutralize the negative effect of emerging-market stocks. The exchange-traded share class returned 10.4% annualized for the five years through September 2025, outpacing its average category peer by 26 basis points annualized. Its volatility was slightly higher, but risk-adjusted returns still edged out the category average. The fund is fully invested and charges one of the lowest fees in the category. Investors should expect it to capture more of the market’s long-term upside than many of its competitors.

The fund captures nearly all of the foreign stock market while effectively keeping a lid on turnover. It earns a High Process Pillar rating.

The fund tracks the FTSE Global All Cap ex-US Index. Constituents must pass several screens to be included in the portfolio. This benchmark first sorts all companies listed outside of the US by free-float-adjusted market cap. It targets firms that land in the top 98% of this group, with a buffer around that threshold to mitigate unnecessary turnover. Annual turnover for the fund regularly measures around 5%, a fraction of the typical peer’s average annual turnover. High turnover can raise transaction costs that take a bite out of returns.

Additional liquidity screens ensure the investability of the index’s holdings, making it easier to track. The index weights the final list of more than 8,000 stocks by market cap, an efficient method that also fosters low turnover. The portfolio reconstitutes semiannually in March and September.

Including emerging-market stocks ensures the portfolio captures the entire foreign stock market, but it leads to country and regional allocation discrepancies relative to the category average. Larger-than-average stakes in emerging countries like China, India, and Taiwan are offset by smaller stakes in developed European nations like the UK and France. The fund’s Japanese stock allocation is its largest, although it tends to be slightly leaner than the category norm.

The fund’s stake in emerging-market stocks is more than double that of the typical category peer. Many passive competitors exclude emerging markets altogether. This fund’s extensive holdings list is more than double most index fund peers that exclude emerging-market stocks from their portfolios. Asia-listed technology conglomerates regularly stand near the top of the portfolio yet are largely absent from competitors’ portfolios.

Sector weightings look comparable to the category despite regional and country differences. No sector weightings significantly deviate from the category average. Financials stocks claim the highest share of the portfolio, with industrials next up. Despite their prominence, industrial and financial services companies rarely rank among the fund’s top 10 holdings. Healthcare and technology firms tend to receive the top spots in this portfolio.

Vanguard's equity index group earns an Above Average People Pillar for its well-supported and stable management team adept at leveraging Vanguard's comprehensive resources. Its portfolio managers benefit from the firm's global infrastructure and advanced portfolio management technology, which facilitates cost-efficient trading around the globe. The infrequent turnover of managers, coupled with Vanguard's practice of rotating them across various funds, enhances their expertise and understanding of different market segments.

The fund's managers directly handle trading, providing them with deeper insights into the portfolio's operations than a stand-alone trader might have. They are backed by a global team of dedicated personnel and employ sophisticated, scalable technology to minimize their workload and enhance tracking accuracy. Vanguard's independent risk-management team plays a crucial role in ensuring its funds adhere to predetermined tracking tolerances. It collaborates closely with the managers to oversee trades and address potential issues proactively. Vanguard compensates managers based on tracking error and excess return metrics to foster a culture of accountability and ensure that the management team's interests are closely tied to investors'.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

Much of this fund’s category-relative edge traces back to its low fee. The ETF share class returned 8.4% annualized for the 10 years through September 2025, bettering the category norm by 80 basis points.

While the fund’s lower fee provides a durable advantage, its country and regional allocations can drive category-relative performance from time to time. For example, the fund’s relatively hefty allocation to emerging markets has hurt category-relative performance in recent years as those stocks underperformed from 2021 through 2023. Over the long term, though, its low fee and superior diversification should shine through any short-term hiccups.

This fund does not hedge currency risk. This has mostly hampered performance since the US dollar has been stronger than the foreign currencies represented in this portfolio. However, the advantages and disadvantages of currency hedging come in waves. Over the long run, the impact of foreign exchange rates on total return tends to wash out.

Vanguard Total International Stock ETF's Prospectus Adjusted Expense Ratio is 0.05% per year. It places it in the cheapest quintile of the Morningstar US Fund Foreign Large Blend Category, where the median fee is 0.82% per year. This cost positioning translates into a Medalist Rating Price Score of 2.32, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.