Vanguard Funds ETF #1 — Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)
Allocation: 10% of Portfolio
YTD Performance: 1.4%
Although I just said mid caps are a key part of any portfolio and tend to outperform small caps while utilizing less risk, there is always a place for small caps in your portfolio.
That’s especially true when the two previous picks from Vanguard Funds are almost 100% invested in the U.S. with virtually no international exposure. That’s just not smart when you consider how strong European stocks have been since last August. For this reason, a little bit of love outside America makes total sense.
My recommendation is to go with the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), a fund that tracks the performance of the FTSE Global Small Cap ex US Index, which consists of approximately 3,050 stocks in 46 countries including the United Kingdom, Canada, Japan and Taiwan. Investing in both developed and emerging markets, the fund gives you good exposure to some of the world’s future stars at an annual expense ratio of just 0.2%.
With such low fees it’s no wonder Vanguard Funds has $2.2 billion in invested in this ETF.