VEA vs. VWO vs. VXUS - Which ETF for International Stocks?
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- Опубликовано: 30 апр 2022
- Three of the most popular international ETFs are Vanguard’s VWO, VEA, and VXUS. Is there one that reigns supreme to hold alongside U.S. stocks?
// SUMMARY:
Index investors in the U.S. usually know it’s a good idea to diversify in equities outside the United States. At global market weights, U.S. stocks only comprise about half of the global market. International stocks don’t move in perfect lockstep with U.S. stocks, offering a diversification benefit. If U.S. stocks are declining, international stocks may be doing well, and vice versa.
VEA is Vanguard’s broad index fund for Developed Markets. Its mutual fund equivalent is VTMGX. VWO is the one for Emerging Markets. Its mutual fund equivalent is VEMAX. Thus VXUS (mutual fund equivalent VTIAX) is roughly 75/25 VEA/VWO. So for a realistic example where the portfolio has home country bias (most people do), a 100% equities portfolio of 80% VTI (total U.S. stock market) and 20% VXUS unfortunately only has about 5% exposure to Emerging Markets.
To remedy this, we have to forego the use of VXUS and use its components VEA and VWO to get more granular. I personally choose to equally weight Developed Markets and Emerging Markets in international stocks in my own portfolio to take advantage of this superior diversification and greater expected returns while still including the many countries in Developed Markets that may outperform the U.S. during certain periods.
Does this mean investors should use Emerging Markets for their entire ex-US stocks position? Probably not. Again, we wouldn’t want to miss out on all the developed countries around the world. That said, it shows we can probably reliably expect a greater diversification benefit and higher returns over the long term by giving a little more weight to Emerging Markets. I keep it pretty simple and just give equal weight to Developed Markets and Emerging Markets, i.e. a 1:1 ratio instead of VXUS’s 3:1.
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What does your international stock market exposure look like?
Hey I understand you can’t give financial advice. With that being said I would love to hear your thoughts about my international allocation 30% of my portfolio is international stocks. Half of that 30% is Vxus & the other half is vwo. I feel like with these two together based on the make up of the funds this gives me bra diversification and international stocks but a slight till towards emerging markets. I would love any feedback you can give me. Thanks
@@Compounddeznuts 50/50 VXUS/VWO is roughly equivalent to 37.5/62.5 VEA/VWO.
@@jasonhobbs2405 okay thank you for the correction! I don’t think I want that much overweight in emerging markets so I might consider a change. Thanks!
@@user-tm1kb3fq4m Short TIPS are the closest thing to Series I savings bonds.
@@user-tm1kb3fq4m Yep
Watched this again and have a better understanding now. There is so much knowledge here.
Awesome!
Great video, your content has been really informative and helped me really start investing..
Currently I am 70/15/15 VTI/VEA/VWO.
Thanks, Joshua! Glad you've found it to be informative.
You're amazing. Thank you!
Thanks!
I use VXUS for simplicity but tilt value with AVDV and AVES at a ratio of 2:1:1. With this set up my EM remains at market cap weight in the whole portfolio.
Thanks for sharing!
Great video. I have VWO, VXUS, MCHI for international exposure (total 23% of overall stock portfolio so 77% US stocks).
Thanks for sharing!
Would you be able to help building the equivalent of your GingerAle portfolio using UCITS ETFs ?
I split everything 55/45. So 55/45 US/Ex-US, and in the Ex-US, 55/45 Developed/Emerging.
This gives me: VTI @ 55%, VEA @ 25%, VWO @ 20%.
I like it!
Great Content , I am a huge fan of SCHD and I feel like that was a smart move on your part. SCHD is my favorite pure dividend growth ETF. I also own some hybrid dividend/covered call ETF’s like DIVO and JEPI. You are a young guy, so I think more growth oriented Investments make more sense than JEPI, a more income focused investment.
I am in the process of transferring my Schwab trading account to M1 Finance. It just suits my more passive, long term investment style where I can invest smaller amounts and still get fractional shares on all of my investments along with automatic rebalancing. Great content as always.
The move to M1 makes sense...it is much more hands off than schwab. I've really enjoyed my experience with M1 so far. And regarding the covered call ETF's, I've thought about selling them to reinvest into some of my lower yield/higher dividend growth positions, but I'm not sure what I'm going to do there. I really like the income I'm getting from them. My financial advisor will help me figure it out. she has been doing a great job on my investment, and i think you should seek for a consultant advice on that , or you can as well made a contantult with my advisor. she is realistic and knows the best for you.
Michelle Francis Elo " . is her name. She's quite
known and has got a website. So, you can
check her out online and subsequently
contact from there.
The move to M1 makes sense...it is much more hands off than schwab. I've really enjoyed my experience with M1 so far. And regarding the covered call ETF's, I've thought about selling them to reinvest into some of my lower yield/higher dividend growth positions, but I'm not sure what I'm going to do there. I really like the income I'm getting from them. My financial advisor will help me figure it out. she has been doing a great job on my investment, and i think you should seek for a consultant advice on that , or you can as well made a contantult with my advisor. she is realistic and knows the best for you.
*Michelle Francis Elo* " . is her name. She's quite
known and has got a website. So, you can
check her out online and subsequently
contact from there.
The move to M1 makes sense...it is much more hands off than schwab. I've really enjoyed my experience with M1 so far. And regarding the covered call ETF's, I've thought about selling them to reinvest into some of my lower yield/higher dividend growth positions, but I'm not sure what I'm going to do there. I really like the income I'm getting from them. My financial advisor will help me figure it out. she has been doing a great job on my investment, and i think you should seek for a consultant advice on that , or you can as well made a contantult with my advisor. she is realistic and knows the best for you.
@@goranvrancic371 ok. how do i reach out to her assistance or ideas ?
@@dekoelschekoelsche3279 The consultant that guides and assist me is Michelle Francis Elo you can check her out online and reach out to her through her website to book an appointment.
Hey man I’ve got a question for you that I’ve been struggling to find an answer too. I agree with you in having a bit more money in emerging markets (primarily to invest in chinas ascension) but my concern is this. What happens if/when China gets classified as a developed market. Would it get removed from VWO and as a result tank the whole index? I am not sure if something like this has happened before but it gives me pause in investing in VWO
Would get removed but would not tank anything. It would just move into VEA, then all constituents of VWO get more weight. Happens all the time with small/mid/large cap funds.
@@OptimizedPortfolio they would get more weight but if the ETF tracks the price of all of the stocks in the index and 40% of those stocks leave then the etf would surely fall right? It would have to, isn’t that how they work? Because unlike when this happens in small and large cap etfs this would literally be like 40% of the index as opposed to a few percent
@@astrahl No. Reconstitution of the index wouldn't cause anything to tank. If that were the case, we'd have a lot of problems. Not the same thing as a Russia situation when the stocks actually go down in value. Plus, you'd still own it in VEA or VXUS, assuming you had exposure to ex-US Dev'd Markets. So it would just be switching from the right pocket to the left pocket.
What website did you use to compare all three different types of portfolios?
PortfolioVisualizer
I like IQLT and EEMA
Thanks for sharing!
Can you please do a video on DISV vs AVDV? Also a video on international small cap value vs US small cap value would be fantastic
Sure thing. Covered a few in my most recent video here: ruclips.net/video/zMRFNMFbGSM/видео.html
What about dividends? Aren't foreign stocks paying more dividends?
On average, yes.
What do you think of 50% splg 25% see and 25% vwo?
SEE as in the individual stock?
@@OptimizedPortfolio sorry it was 50% splg- 25% VEA - 25% VWO
@@angeloarmenta1631 Ah gotcha. That's basically what I do.
IQLT IS BETTER THAN VEA
And value small caps? Slyv
SLYV is US small cap value, yes.
i picked 50% US, 30% developed market ex-US, 20% EM.
Thanks for sharing!
I'm overweight in EM and Small cap for similar reasons.
Awesome!
I'm not sure it is wise to consider only one time period. Did well in the early 2000's but since then the have stunk it up. VEA has outperformed VXUS for at least theast 10 years. I think a rolling time period analysis is a better way to look at this type of thing.
Remember, holistic portfolio, not assets in isolation.
Here's nearly a century: www.ifa.com/charts/154h
Here's the past 30 years visualized: www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=TotalStockMarket&allocation1_1=60&allocation1_2=60&asset2=IntlDeveloped&allocation2_1=40&asset3=EmergingMarket&allocation3_2=40
Still too much US centric point o view. Just choose FTSE All-World/MSCI ACWI and if you want to add more risk and more potential profit add some emerging markets fund. That's it.
How is VWO "US centric?"