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VEU vs VXUS: Which Is The Best International ETF?

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We compare VEU vs VXUS:

Vanguard FTSE All-World ex-US ETF (VEU) vs Vanguard Total International Stock ETF (VXUS).

There is no shortage of options for investing in Exchange Traded Funds (ETFs).

Choosing between two funds can be difficult, but I will make it easy to decide between VEU and VXUS.

VEU vs VXUS Graphic

 

VEU vs VXUS

The main difference between VEU and VXUS is that VEU tracks the FTSE All-World ex U.S. Index, while VXUS tracks the FTSE Global All Cap ex-US index.

Another significant difference is the number of stocks in each, with VEU having 3,656 different companies in the index compared to 7,717 with VXUS.

Lastly, VEU and VXUS have the same expense ratios.  VEU has an expense ratio of 0.07%, while VXUS has the same expense ratio of 0.07%.

As a result, both funds are considered low-cost ETFs.

VEU

  • Tracks the FTSE All-World ex-US Index
  • Category: Foreign Large Blend
  • Expense Ratio 0.07%
  • No Minimum Investment
  • Holds 3,656 Stocks

VXUS

  • Tracks the FTSE Global All Cap ex-US Index
  • Category: Foreign Large Blend
  • Expense Ratio 0.07%
  • No Minimum Investment
  • Holds 7,717 Stocks

 

VEU vs VXUS Performance

Vanguard’s VEU and VXUS have performed similarly over the last 10 years, with VXUS beating VEU by only 0.03% annually.  This difference can be considered insignificant, even when considering compound interest on those returns.

Here is how their performance compares:

VEU vs VXUS Performance

Here is their short term performance:

VEU vs VXUS Performance Chart

As you can see, VXUS and VEU have moved in parallel over the years.  However, this doesn’t necessarily mean this trend will continue.

Similarities between VXUS and VEU:

  • Exchange-Traded Funds (ETFs)
  • Low Expense Ratios
  • International Asset Allocation
  • A Large Number Of Holdings

 

VEU vs VXUS Holdings

The main difference between VEU and VXUS holdings is their number of holdings.  VEU holds 3,656 companies, while VXUS holds 7,717 companies.  Both ETFs have a large percentage of international equities.

VEU and VXUS have similar exposure to many countries like Japan, the U.K., and China.

VEU vs VXUS Holdings

VXUS top 10 holdings comprise 11% of its portfolio, while VEU’s top 10 holdings are 9% of its total holdings.

There are several overlapping holdings between VEU and VXUS.

 

Does VXUS Include VEU?

50% of VXUS holdings are also in VEU, while 98% of VEU’s holdings are also in VXUS.  As a result, they have 3,478 overlapping holdings.

VEU vs VXUS Holdings Overlap

This makes VXUS more diversified than VEU.

Here is their percent of overlapping holdings and overlap by weight:

Overlap By Weight

 

Is Vanguard VXUS a Good Investment?

VXUS makes a good choice for investors looking for a low-cost, diversified ETF with international exposure.  In addition, Vanguard’s VXUS carries a low expense ratio of 0.07%, making it an excellent choice for investors looking to avoid investment fees.

Lastly, VXUS can be paired with other ETFs to construct a diversified portfolio containing domestic and international stocks.

All this makes VXUS a good investment for long-term investors looking to invest in international stocks.

 

What’s an Emerging Market?

From an academic standpoint, an emerging market refers to a market or country that possesses some characteristics of a developed economy.

These markets are experiencing considerable economic growth and are evolving from “developing” to “developed” economies.

However, with investments, the term “Emerging Market” does not have a one-size-fits-all definition.

The definition depends on varying perceptions which in the first place is the underlying factor for the major point in VEU vs VXUS.

In line with national GDP, the International Monetary Fund ranks South Korea as the tenth-largest economy in the world.  The Korean stock market is also the fourteenth largest stock market globally by market capitalization.

Yet, the MSCI has classified South Korea as an emerging rather than a developed economy.

This is somewhat ironic since the S&P 500 index, a top benchmark index for the U.S. stock market, has acknowledged the country as a developed market for over twenty years.

FTSE considered South Korea an emerging market until 2009 when it ‘promoted’ the country to a developed market.

However, MSCI points out several factors that disqualify South Korea as a developed market.

These include the lack of offshore currency and the recent short-selling ban to curb the effects of the pandemic, which affected investors.

 

VEU Description

The Vanguard FTSE All-World ex-US ETF (VEU), launched in 2007, is one of the earliest ETF products of the second largest investment company in the world, Vanguard.

The fund seeks to track the performance of the FTSE All-World ex-US Index using the indexing investment strategy.

This index acts as a benchmark to measure the return results of stock issued by companies in developed and emerging non-U.S. equity markets around the world.

VEU serves as an accurate proxy for the entire international equity market.

The fund holds a portfolio of global large and midcap stocks outside the U.S.

 

VEU Performance

VEU seeks to replicate the performance of the FTSE All-World ex-US Index.

It has resulted in sub-par performance returns over the last 10 years:

VEU Performance Chart

Here is VEU’s performance over the last 10 years:

VEU Performance

 

VEU Holdings

The top 10 holdings for VEU make up 10% of its total assets.

VEU Top Holdings

Vanguard’s VEU is largely made up of Taiwan Semiconductor Manufacturing, Nestle, Samsung, Tencent, and Roche and provides exposure to over 3,000 stocks.

 

VXUS Profile

  • Fund Inception: 2011
  • Expense Ratio: 0.07%
  • Number Of Stocks: 7717
  • Top 10 Holdings: 9%
  • Equivalent Admiral Fund (VTIAX)

The Vanguard Total International Stock ETF (VXUS) provides investors with exposure to developed and emerging non-U.S. equity markets.

The ETF is comprised of companies located mostly in Emerging Markets, Europe, and Pacific Markets.

VXUS was created in 2011 and currently has an expense ratio of 0.07%, which makes it a low-cost ETF to own.

 

VXUS Performance

Vanguard’s VXUS seeks to replicate the performance of the FTSE Global All Cap ex-US Index.

Performance for international equities has lagged U.S. stocks over the last 10 years:

VXUS Performance

 

VXUS Holdings

Here are the top 10 holdings for VXUS:

VXUS Holdings

VXUS is largely made up of Taiwan Semiconductor Manufacturing, Tencent Holdings, Nestle, Samsung, and ASML Holding.

Over the last 10 years, VXUS has underperformed the S&P 500 with an average return of 5% per year compared to 16.5% from the S&P 500.

VXUS has $ 385 billion in total net assets.

It has underperformed over the last 10 years, but there is no guarantee that the next 10 years will look the same.

 

No Minimum Investment

VEU and VXUS are exchange-traded funds (ETFs), so there is no minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance.  (Get $50 When You Use This Link)

Typically, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment.

You no longer have to keep your money sitting idle until you have enough to purchase a full share.

This is especially beneficial for ETFs with a high share price.

 

Which is Better VEU or VXUS?

VEU and VXUS are similar investments.  However, VXUS offers more diverse international exposure compared to VEU.  VEU is focused on large and mid-cap companies from developed and emerging markets and excludes U.S. companies.

This has resulted in lower performance returns for VEU over the last 10 years, although only by 0.03% compared to VXUS.

I think both ETFs can have a place in a long-term investor’s portfolio depending on your investment goals.

VEU vs VXUS Comparison Chart

If having an asset allocation that includes developed and emerging market stocks at a low fee helps you diversify your portfolio, then VEU would be a great option.

Suppose you are looking for even more diversification.  In that case, VXUS allows you to easily invest in over 7,000 international companies at the same low cost.

Investors can add VEU or VXUS according to their desired asset allocation.

For example, I own a small percentage of VXUS to provide my portfolio with international exposure.

Lastly, it’s important to consider costs and fees because they can add up in the long run.  That’s why it’s so important to purchase and sell your shares commission-free.

Again a great way to do this is with M1 Finance or using the Vanguard platform directly for these ETFs.

You can purchase fractional shares for free with M1 Finance, and they give you the ability to buy VEU, VXUS, and thousands of other stocks/ETFs.

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Is VXUS or VEU Better for Financial Independence?

Both VEU and VXUS can help you get to Financial Independence Retire Early (FIRE).  They both have low expense ratios.

I would consider them great funds to add international exposure to a portfolio with core holdings like VOO or VTI.

Of course, you should make the best decision for your risk tolerance and investment goals.  (This is not investment advice)

Lastly, being part of the FIRE community, we aim for the lowest fees possible and are big fans of Vanguard.

These two funds fall into those categories.

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Calculate Your F.I. Number With My Free FIRE Calculator

 

My Winner: VXUS

My winner is VXUS for its diversification and higher liquidity.  VXUS holds more than twice as many stocks compared to VEU.  It also has more net assets, which provides VXUS with more liquidity.

However, as I mentioned, I believe you can invest in both depending on your desired asset allocation.

Lastly, both ETFs are Vanguard funds which likely means they will continue to offer low-cost ETFs and can be purchased commission-free from the vanguard platform or M1 Finance.

If you like comparisons like these, you can also look at other popular ones like VXUS vs VTIVGT vs QQQ, and VTI vs QQQ.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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