Investors wanting low-cost exposure to international stocks are wise to take a close look at the broad selection of Vanguard international funds.
Although capital markets around the world are relatively correlated, academic research has long revealed that investors generally have better performance results in the long run when international stocks are included in the portfolio. And there have been extended periods in history where international stocks have outperformed U.S. stocks.
Therefore, international funds can be a smart tool for diversifying a portfolio and they can potentially increase long-term returns. Vanguard Funds offers a few good ways to capture international stock performance.
Vanguard International Funds
Vanguard Developed Markets Index (MUTF:VDVIX): Vanguard’s VDVIX passively tracks the FTSE Developed All Cap ex US Index, which covers about 3,800 large-, mid-, and small-cap stocks of companies in developed markets outside the U.S. This fund includes the likes of Nestle SA (ADR) (OTCMKTS:NSRGY), Samsung Electronics (OTCMKTS:SSNLF) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A, NYSE:RDS.B). The expense ratio for VDVIX is 0.17%, or $17 for every $10,000 invested.
Vanguard Emerging Markets Select Stock (MUTF:VMMSX): Investors wanting international stock exposure outside of developed markets can get it with VMMSX, which is an actively-managed fund to holds stocks of companies in emerging markets like China, India, Brazil and Russia. Emerging markets tend to be more volatile than developed markets but they can add diversity and potential for higher long-term returns. The expense ratio for VMMSX is 0.9%.
Vanguard Emerging Markets Stock Index (MUTF:VEIEX): If you’re looking for low-cost exposure to emerging markets stocks, Vanguard’s VEIEX is a smart choice. This passively-managed fund tracks the FTSE Emerging Markets All Cap China A Inclusion Index, which includes about 4,500 stocks of companies in emerging markets countries. With a low expense ratio of just 0.32%, VEIEX can potentially outpace similar funds with higher expenses.
Vanguard European Stock Index (MUTF:VEURX): Vanguard’s VEURX holds stocks of countries in the European region, covering about 1200 Europe stocks, which is approximately 50% of the non-U.S. equity market. Europe stocks can add diversification to a portfolio without the volatility of other regions, such as those included in emerging markets. The expenses for VEURX are 0.26%.
Vanguard FTSE All-World ex-US Index (MUTF:VEWIX): This international stock index fund from Vanguard passively tracks the FTSE All-World ex-US index, which consists of over 2500 large- and mid-cap stocks of companies in developed markets and in emerging markets outside the U.S. The broad coverage of non-U.S. stocks makes VEWIX a good compliment to a U.S. stock index fund. The expenses for VEWIX are 0.23%.
Vanguard FTSE All-World ex-US Small-Cap Index (MUTF:VFSVX): Investors looking for low-cost, broad exposure to small-cap stocks outside the U.S. will like what they find in VFSVX, This passively-managed fund tracks the FTSE Global Small-Cap ex US Index, which includes about 3,500 small-cap stocks in 47 countries. VFSVX can compliment an international stock fund that covers large- and mid-cap stocks. Expense for the fund are VFSVX.
Vanguard International Explorer (MUTF:VINEX): This actively-managed international stock fund from Vanguard focuses on small-cap stocks from developed countries outside the U.S. with about 10% allocated to emerging markets. Investors holding VINEX get exposure to over 300 small-cap international stocks of companies in more than 20 countries. The focus on small-cap stocks can make VINEX more volatile than international stock funds covering large- and mid-cap stocks. The expense ratio for VINEX is 0.46%.
Vanguard International Growth (MUTF:VWIGX): Investors looking for an aggressive fund that holds international stocks with high growth potential can consider adding VWIGX to their portfolio. The portfolio covers developed and emerging markets but is relatively concentrated with 125 holdings. VWIGX can be an appropriate holding for investors wanting more exposure to growth stocks than the broader international stock indices. Expenses for VWIGX are 0.46%.
Vanguard International Value (MUTF:VTRIX): This international stock fund focuses on value stocks of companies located outside the U.S. in developed and emerging markets countries. The fund is managed by three investment advisers, each following their own management style. This multi-manager approach adds an extra layer of diversification to a fund that holds about 125 foreign stocks. Expenses for VTRIX are 0.43%.
Vanguard Pacific Stock Index (MUTF:VPACX): Vanguard’s VPACX focuses on stocks of companies in the developed countries of the Pacific Rim, such as South Korea and Japan. This narrow focus can result in higher volatility than the broader international stock indices; however the trade off in risk can lead to periods of out-performance. The expense ratio for VPACX is 0.26%.
Vanguard Total International Stock Index (MUTF:VGTSX): This passively-managed international stock fund is arguably the best mutual fund to capture the returns of the entire non-U.S. stock market. The total number holdings exceeds 6,000 stocks from developed and emerging markets. So shareholders of VGTSX get a broadly diversified portfolio for a cheap expense ratio of just 0.18%.
All of these Vanguard international stock funds have a minimum initial investment of $3,000.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although some of his client accounts hold VGTSX. Under no circumstances does this information represent a recommendation to buy or sell securities.