Best Index Fund #4: Vanguard FTSE Developed Markets ETF (VEA)
Investors should diversify by holding companies of different sizes, as well as those that deal in different businesses, sure. But another good way to protect your portfolio is by venturing outside of the U.S. and owning international stocks.
The Vanguard FTSE Developed Markets ETF (VEA), which tracks the FTSE Developed ex-North America Index, is one of the best index funds for developed countries. VEA allows investors to access roughly 1,300 companies from 23 developed economies excluding the U.S. and Canada. The majority of its holdings (60%) are in Europe, while nearly 40% are in the Pacific.
While VEA is decidedly international, its companies should be awfully familiar to most Americans. Some of its top 10 holdings include Nestle (NSRGY), Toyota (TM), Royal Dutch Shell (RDS.A, RDS.B) and BP (BP).
Because of its very large-cap bend and positioning in developed countries, VEA isn’t exactly a growth machine. But it’s one of the best index funds since it’s a fortress of stable blue-chips — one that also yields roughly 3% in dividends annually, for those seeking income.
As is the norm for Vanguard funds, VEA charges a mere 0.1% in expenses — 24 basis points less than its larger competitor, the iShares MSCI EAFE ETF (EFA).