Own a Piece of the Entire Foreign Stock Market With This ETF
Outstanding diversification and an ultralow fee earn this fund a Gold rating.
Foreign stocks provide access to a wider opportunity set than stocks listed in the United States, making them a key building block for constructing a well-diversified portfolio. A comprehensive fund like Vanguard Total International Stock ETF (VXUS) provides an excellent base for building an allocation to non-U.S. stocks. It covers the entire investable market outside of the U.S., giving investors access to stocks of all sizes. The fund's ultralow expense ratio and market-cap-weighted approach curb the cost of ownership, providing it with a significant advantage over its more expensive rivals. It earns a Morningstar Analyst Rating of Gold.
The fund tracks the FTSE Global All Cap ex US Index, which includes stocks of all sizes from foreign developed and emerging markets. It weights them by market capitalization, an approach that benefits investors by capturing the market's collective opinion of each stock's value while keeping turnover low. Market-cap-weighting can be tough to beat because the market tends to do a good job valuing stocks over the long term. Occasionally it will increase the fund's exposure to expensive stocks when investors get excited about an area of the market. But this doesn't undermine its long-term efficacy.
Daniel Sotiroff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.