When you think of Vanguard funds, the first thought that comes to your mind is likely their low-cost index funds, such as their flagship index fund, Vanguard 500 Index (VFINX), which passively invests in U.S. stocks.
But some of the best Vanguard funds receive lesser attention and these include a diverse selection of international stock funds that, when combined with Vanguard’s domestic stock funds, can provide exposure to nearly every part of the world.
So how many Vanguard funds do you think it would take to cover the major regions of the earth? After taking a close look at more than a dozen international stock funds offered at Vanguard, we narrowed down the list to five funds that do the best job of providing exposure to the U.S., Europe, emerging markets, developed Asia and the small- and mid-cap stocks of developed countries.
Here are the five best Vanguard funds to invest in the entire planet.
Best Vanguard Funds for Global Investment: Vanguard Total Stock Market Index Fund (VTSMX)
World Region/Type: North America
Expenses: 0.17%, or $17 for every $10,000 invested
If you want to get a good start on exposure to stocks around the world, North America is a great place to start with. Vanguard Total Stock Market Index Fund (VTSMX) is the best for capturing U.S. equities.
The VTSMX portfolio consists of more than 3,700 stocks, including small-, mid- and large-cap U.S. equities. VTSMX is a cap-weighted index, so top holdings are mega-cap stocks like Apple Inc. (AAPL), Microsoft Corporation (MSFT), and Exxon Mobil Corporation (XOM). But the smaller company stocks tend to give VTSMX a long-term performance edge over index funds that focus only on large-cap stocks.
Thanks to the fund’s key attributes of low expenses, broad diversification and tax-efficiency, VTSMX is the biggest mutual fund in the world, as measured by assets under management.
Best Vanguard Funds for Global Investment: Vanguard European Stock Index Fund (VEURX)
World Region/Type: Europe
Now we move across the Atlantic Ocean to cover Europe and there’s not a better fund to do this than the Vanguard European Stock Index Fund (VEURX).
VEURX holds more than 1,200 stocks in the European region that make up about half of the non-U.S. equities in the market universe. Most of the portfolio holdings are large-cap stocks like Nestle (NSRGY), Roche Holding AG (RHHBY) and Royal Dutch Shell (RDS.A, RDS.B).
VEURX makes a great diversification tool, not only because of its broad exposure to Europe, but also because the large exporters, which are plentiful in the fund holdings, can benefit from a strong U.S. dollar.
Best Vanguard Funds for Global Investment: Vanguard Pacific Stock Index Fund (VPACX)
World Region/Type: Pacific Asia/ Developed
To cover the developed countries east of Europe, in the Pacific Rim of Asia, we chose Vanguard Pacific Stock Index Fund (VPACX).
VPACX invests in more than 2,000 stocks in the Pacific region, which covers developed countries like Japan, South Korea and Australia. Its portfolio makes up one-fourth of the non-U.S. equity market universe.
With this fund under our belt, we’ve covered about three-fourths of the planet. But there are more markets to tap into with select Vanguard funds.
Best Vanguard Funds for Global Investment: Vanguard International Explorer Fund (VINEX)
World Region/Type: Europe and Asia/ Small-Cap and Mid-Cap Developed
As previously noted, VEURX and VPACX cover the large-caps of Europe and developed Asia, but in order to cover the small- and mid-cap stocks of those regions, we’ll need the Vanguard International Explorer Fund (VINEX).
VINEX invests in more than 300 stocks in 20 different countries, with 90% in developed countries and about 10% in emerging markets. Rather than focusing on large-cap stocks like most other international stock funds, VINEX holds smaller, lesser-known equities like Cerved Information Solutions, Anima Holding SpA and Braas Monier Building Group.
Although exposure to small- and mid-cap overseas stocks is much more risky than with the large-caps, long-term investors have a chance to be rewarded with much greater returns.
Best Vanguard Funds for Global Investment: Vanguard Emerging Markets Stock Index Fund (VEIEX)
World Region/Type: Emerging Markets
To complete our worldwide coverage with Vanguard funds, we’ll need a fund that addresses emerging markets. We chose Vanguard Emerging Markets Stock Index Fund (VEIEX) for this job.
Some of the specific countries represented in VEIEX include China, Russia, Brazil, India and Taiwan. There are roughly 3,500 stocks in the fund, primarily consisting of large-cap emerging market stocks like top holdings Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (TSM), Tencent Holdings Ltd (TCHEY), and China Mobile Ltd. (ADR) (CHL).
Although emerging market stocks generally have more market risk than that of developed markets, they serve well as a diversification tool within a complete portfolio of mutual funds.
And that’s the perfect segue to end our list — you are now armed with five, worldwide Vanguard funds that can work well together in the equity portion of your own portfolio.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds VTSMX, in some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, South Carolina. Under no circumstances does this information represent a recommendation to buy or sell securities.