Vanguard FTSE All-World ex-US ETF (VEU)
It’s not that I’m anti-U.S. heading into 2014, I just think there are a number of areas outside of the U.S. that either performed poorly this past year or are going to continue to enjoy above-average returns in the year ahead. With an expense ratio of just 0.15% (or $15 for every $10,000 invested), the Vanguard FTSE All-World ex-US ETF (VEU) is a great, cheap way to buy the world beyond our door steps.
VEU is spread amongst a huge number of countries. At the end of November, a total of 21 countries had a weighting of at least 1%, with Japan the top holding at 16.2% and the United Kingdom in second place with 15.4% of its overall portfolio. Year-to-date, VEU is up 8.9% through Dec. 13, trailing its MSCI EAFE benchmark by 760 basis points. Emerging markets are a big reason for the underperformance, but I see them doing much better in 2014. With VEU investing about 18% of its portfolio in these up-and-coming markets, a turnaround there would certainly help its performance.
With 47% of the $20.2 billion in total net assets invested in Europe, I see good things happening overseas in 2014. VEUs biggest holding — Nestle (NSRGY) — could end up selling its 29% interest in L’Oreal (LRLCY) sometime in the new year. That would bring in a huge amount of cash that it could reinvest in its best-performing business segments, or use to repurchase a significant number of shares.