We are going to explore the difference between Vanguard Total International Stock ETF (VXUS) vs Vanguard Total Stock Market ETF (VTI).
There is no shortage of options when it comes to investing in Exchange Traded Funds (ETFs). Choosing between two funds can be difficult, but I will make it easy for you to decide between VXUS and VTI.
VXUS vs VTI
The primary difference between VXUS and VTI is the asset allocation of the exchange-traded fund (ETF). VXUS is a collection of stocks from companies around the world except for the United States. VTI holds almost all U.S based companies. Another significant difference is the number of stocks in each, with VTI having 3535 different companies in the index compared to 7765 with VXUS.
- Tracks the performance of the CRSP US Total Market Index
- Has an expense ratio of 0.03%
- No minimum initial investment
- Holds 3535 stocks
- Tracks the performance of the FTSE Global All Cap ex-US Index
- Has an expense ratio of 0.08%
- No minimum initial investment
- Holds 7765 stocks
VXUS vs VTI Performance
VXUS and VTI have performed very differently over the last 10 years with VTI beating VXUS by more than 8% annually. That is a significant difference, especially when you consider compound interest on those returns.
Similarities between VXUS and VTI:
- Exchange-Traded Funds (ETFs)
- Low Expense Ratios
Here is how their performance compares:
VXUS (Blue) VTI (Yellow)
As you can see, VTI has significantly outperformed VXUS over the years. However, this doesn’t necessarily mean this trend will continue.
VXUS and VTI Differences
VXUS vs VTI primarily differ in that VTI holds almost all U.S-based companies, while VXUS holds a collection of stocks from companies around the world except for the United States. VTI also has fewer holdings in the index compared to VXUS. By investing in an ETF with more holdings you are helping diversify your portfolio and minimize risk.
Differences between VXUS and VTI:
- Different Number Of Holdings (~7765 vs ~3535)
- Expense Ratio (0.08% vs 0.03%)
- Level Of Diversification
- Fund Inception: 2001
- Expense Ratio: 0.03%
- Number Of Stocks: 3535
- Top 10 Holdings: 23.9%
Here are the top 10 holdings for the Vanguard Total Stock Market ETF (VTI):
The fund, as of September 2021 has $1.3 trillion in total net assets.
VTI is largely made up of Apple, Microsoft, Google, Amazon, and Facebook and provides exposure to over 3000 stocks. The top 10 holdings of VTI make up 23% of the ETF which is more than VXUS as we will see next.
No Minimum Investment
VXUS and VTI are both exchange-traded funds (ETFs) which mean there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $50 When You Use This Link)***
Normally, 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 when it comes to shares of VTI due to its high prices per share (~$238/Share).
VTI Historical Returns
Take a look at the historical chart below. You can see that the returns for VTI and the S&P 500 have been nearly identical over the last 10 years.
VTI (Blue) S&P 500 (Yellow)
However, be mindful that this does not guarantee the next 10 years will look the same.
- Fund Inception: 2011
- Expense Ratio: 0.08%
- Number Of Stocks: ~7765
- Top 10 Holdings: 9%
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 0.08% which makes it a low-cost ETF to own, however not as low as VTI (0.03% expense ratio).
However, the cost of owning VXUS over VTI won’t likely make a significant difference to an investor since they are both low-cost ETFs. More importantly, is being able to achieve the asset allocation you desire as an investor (international vs domestic)
Moving on, here are the top 10 holdings for VXUS:
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 7.9% per year compared to 16.5% from the S&P500.
VXUS has about 404B in net assets. It has underperformed over the last 10 years but again there is no guarantee the next 10 years look the same.
Which is Better VXUS or VTI?
VXUS and VTI are different investments. VXUS offers more diversification since it holds about twice as many stocks. However, this has resulted in a lower performance over the last 10 years.
Even so, I would say both are a great option for long-term investors. If having an asset allocation that includes international stocks at the lowest fees helps you sleep at night, then VXUS would be a great option. If you are looking for only U.S based companies to invest in, then VTI allows you to easily invest in all of them at a very low cost.
I think both VXUS and VTI can have a place in a long-term investors portfolio.
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 by 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 VTI, VXUS, and thousands of other stocks/ETFs.
Is VXUS or VTI Better for Financial Independence?
Both VTI or VXUS can get you to Financial Independence Retire Early (FIRE). They both have performed great and have low expense ratios.
Being part of the FIRE community I know we aim for the lowest fees possible and we’re a big fan of Vanguard.
My Winner: VTI
If I have to choose one winner it’s VTI for its diversification, lower expense ratio, and because of books like The Simple Path To Wealth.
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.
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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.