This Vanguard ETF Offers Developed-Market Exposure for a Low Price

Key Morningstar Metrics for Vanguard FTSE Developed Markets ETF

• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : Above Average
• Parent Pillar
  : High

Vanguard FTSE Developed Markets ETF’s VEA low fee and expansive portfolio make it one of the more appealing international stock funds available.

This exchange-traded fund tracks the FTSE Developed ex US All Cap Index, which targets small-, mid-, and large-cap stocks from international developed markets, pulling in almost 4,000 names. The final portfolio weights its holdings by market capitalization, which efficiently sizes holdings by harnessing the market’s consensus opinion of each stock’s relative value. Stocks that increase in size 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 wide-ranging target index. Unlike many competitors, it includes stocks from Canada and South Korea, improving its breadth. The fund’s 10 largest positions regularly account for around 10% of assets. Few positions account for more than 2% of the portfolio, with some of its largest holdings being technology stocks or European multinationals.

Emerging-market stocks are a narrow part of the investment universe that this fund misses. While emerging-market stocks usually constitute just a tenth of competitor portfolios, this fund is not positioned to reap the rewards should they perform well. However, middling performance in that segment gave this fund a leg up on competitors in recent years.

Vanguard FTSE Developed Markets ETF returned 10.3% annualized for the five years through September 2026, similar to other developed-market index funds but 1.6 percentage points better than the foreign large-blend Morningstar Category average. Its volatility tends to be slightly elevated for this index, but risk-adjusted returns still measure up well.

Vanguard FTSE Developed Markets ETF: Performance Highlights

Vanguard FTSE Developed Markets ETF gained 9.8% annualized over the 10 years through September 2026, a return similar to other prominent foreign-stock indexes and 1.3 percentage points better than the category norm. Its exclusion of emerging-market stocks limits its scope relative to broader benchmarks and contributes to short-term return discrepancies, but those differences equated to little over the past decade. Volatility tends to run slightly hotter than some benchmarks, but differences are minor.

The index’s focus on developed-market stocks drives most risk/reward differences compared with more far-reaching peers. That’s not guaranteed to continue because those differences have mostly washed out in the long term. Emerging-market stocks underperformed their larger and developed-market peers by a considerable margin from 2021 through 2023. This was attributable in part to rising global interest rates, as emerging markets tend to be more sensitive to interest rate changes. Forces affecting different sections of the global market will continue to drive relative performance, but 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.

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 for much of the fund’s life. 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.