Why This Vanguard ETF Is One of the Best

Key Morningstar Metrics for Vanguard Total International Stock ETF

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

Vanguard Total International Stock ETF’s VXUS 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 8,500 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 less than 15% of assets. Single stocks rarely represent more than 2% of the portfolio, with Taiwan Semiconductor Manufacturing TSM the one outlier, claiming an unusually high 4% stake lately.

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’ struggles from 2021 through 2023 hurt the fund’s category-relative performance for those years.

Low fees have helped neutralize the negative effect of emerging-market stocks. This exchange-traded fund returned 9.4% annualized for the five years through September 2026, outpacing its average category peer by 67 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.

Vanguard Total International Stock ETF: Performance Highlights

Much of this fund’s category-relative edge traces back to its low fee. It returned 9.2% annualized for the 10 years through September 2026, bettering the category norm by 77 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 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 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.