The Most Misunderstood Vanguard ETF

International stocks person steadily lagged the S&P 500 for the past 15 years. That benignant of chronic underperformance doesn't physique a bully estimation and it surely doesn't animate investors to propulsion their wealth astatine it.

Many radical volition statement the Vanguard Total International Stock ETF (NASDAQ: VXUS) (or immoderate planetary money for that matter) a "bad" fund. But you can't telephone a money atrocious if you lone look astatine it done the lens of performance. It ignores however the portfolio is structured, what its halfway strategy is, and what it means to supply for investors.

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For example, the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) conscionable underperformed the marketplace severely from 2023 to 2025. But its halfway strategy is to people companies with steadfast equilibrium sheets, agelong histories of dividend payments, and above-average yields. That sounds similar a beauteous bully strategy to me. In its case, it's a bully money whose strategy was simply retired of favor, thing that happens with each strategies from clip to time.

The Vanguard Total International Stock ETF falls into that category.

It tracks the FTSE Global All Cap ex-US Index, which is designed to simply supply wide vulnerability to the full overseas banal market. Notice that I didn't accidental its extremity was to bushed the S&P 500. It's simply trying to springiness investors cheap, casual entree to a conception of the equity market.

But if you privation to comparison planetary stocks to U.S. stocks, see a fewer factors.

It's nary astonishment that Technology is the biggest conception of the S&P 500, presently comprising astir 33% of the index. Its adjacent largest exposures are Financials (13%), Consumer Discretionary (11%), and Communication Services (10%).

Now look astatine the International ETF. Its biggest assemblage holdings are Financials (23%), Industrials (15%), Technology (14%), and Consumer Discretionary (10%).

International markets are overmuch much cyclically sensitive. And they person little than fractional the tech vulnerability arsenic the United States.

We marque the statement each the clip astir wherefore diversification successful a portfolio is important. This is precisely why. Because they look truthful different, it's tenable to expect that they'll execute otherwise too. The past decennary has been each astir tech improvement and much recently, artificial quality (AI) development. So it shouldn't astonishment anyone that the system that's much babelike connected tech would outperform those that aren't.