Just recently, I was reading an excellent article by InvestorPlace contributor Laura Hoy about three great investments to break you out of your home bias. Hoy recommended two stocks, but also discussed the Vanguard Total International Stock ETF (NASDAQ:VXUS). That caught my eye, so I decided to investigate VXUS stock.
After all, there’s a great big world out there. As an investor, why not explore your options? One of the best features of exchange traded funds is that they offer quick and easy exposure to entire market sectors.
But then, we’re not really just talking about a market sector here, are we? We’re talking about entire regions of the world here. So, it does require an open mind if you’re going to invest in this particular ETF.
Yet, an open mind can result in extraordinary returns. We’ll prove that right now as we analyze the ETF’s price action over the long term.
A Closer Look at VXUS Stock
The onset of the novel coronavirus impacted practically every corner of the Earth. It also put tremendous negative pressure on funds that track international asset growth.
VXUS was certainly no exception to this. In mid-February of 2020, the ETF was trading at around $55, but soon the share price would take a quick dive.
On March 23, 2020, the shares bottomed out at around $37. That’s a steep decline, but patient investors would eventually be reward with outstanding long-term gains.
By November of that year, VXUS staged a full recovery to the $55 level. It was undoubtedly tempting to take profits at that point, but there was more upside to come.
Today, shares are at $61. As you can see, this isn’t necessarily an ETF that will double overnight. Rather, it’s a way to earn steady gains for income-oriented investors. And there’s nothing wrong with that.
Let’s Take a Trip Abroad
This is going to be the cheapest trip you’ll ever take. Are you ready to travel to multiple continents without leaving your home?
The Vanguard Total International Stock ETF will allow you to do that, at least in a figurative sense.
According to Vanguard’s web page on the fund, it seeks “to track the performance of the FTSE Global All Cap ex US Index, which measures the investment return of stocks issued by companies located outside the United States.”
By investing in this ETF, you’ll immediately have broad-based exposure to a multiplicity of non-U.S. equity markets, both developed and emerging.
We’re talking about $394.8 billion in total net fund assets as of Jan. 31, spread across the globe (but not the U.S.):
- 38% Europe
- 28.6% Pacific
- 26.3% Emerging markets
- 6.1% Non-U.S. North America
- 0.4% Middle East
- 0.6% Other
I’ll admit, the fund is light on Middle East holdings. Therefore, you might choose to add stocks or ETF’s focusing on that region of the world in order to achieve a more complete global allocation.
That being said, there are definite advantages to holding VXUS shares. For one thing, the expense ratio is ridiculously low at 0.08%.
The expense ratio is basically what you’d pay the fund managers for picking out the stocks and their weightings in the fund. Imagine that: for literally eight basis points, you can sit back and let the fund managers do the work.
As Hoy pointed out, VXUS comprises a basket of more than 7,000 stocks. Consider the time and effort that it must have taken to pick out all of those stocks.
Why do all of that research yourself, when you can let some really smart people do it on your behalf? They’ll separate the best from the rest so that you can achieve instant portfolio diversification without exorbitant fees.
Not a bad deal, wouldn’t you agree?
The Bottom Line
There’s a lot to like about the VXUS ETF. Perhaps a bigger weighting in the Middle East would make it more geographically diversified, but investors can always fill in that gap themselves.
So, if you’re in the mood to try something that’s not U.S.-centric and is easy on the fees, this ETF certainly deserves your consideration.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.