As an investor, it’s essential to have a well-diversified portfolio that can help you achieve your long-term financial goals. One popular investment option that has gained significant attention in recent years is the Vanguard Total International Stock Market Index Fund ETF Shares (VXUS). In this article, we’ll delve into the details of VXUS and explore whether it’s a good long-term investment for your portfolio.
What is VXUS?
VXUS is an exchange-traded fund (ETF) that tracks the performance of the FTSE Developed All Cap ex US Index and the FTSE Emerging Markets All Cap China A Inclusion Index. The fund provides investors with exposure to a broad range of international stocks, covering both developed and emerging markets. By investing in VXUS, you’ll gain access to a diversified portfolio of over 7,000 stocks from more than 40 countries, including Japan, the United Kingdom, Canada, and China.
Key Benefits of VXUS
There are several reasons why VXUS can be an attractive investment option for long-term investors:
- Diversification: By investing in VXUS, you’ll gain exposure to a broad range of international stocks, which can help reduce your portfolio’s risk and increase potential returns.
- Low Costs: VXUS has a low expense ratio of 0.08%, making it an affordable investment option for long-term investors.
- Tax Efficiency: As an ETF, VXUS is generally more tax-efficient than actively managed mutual funds, which can help minimize your tax liability.
- Flexibility: VXUS can be used as a core holding in your portfolio or as a satellite investment to complement your existing holdings.
Historical Performance of VXUS
To evaluate the potential of VXUS as a long-term investment, let’s take a look at its historical performance. Since its inception in 2011, VXUS has provided investors with competitive returns, outperforming the S\&P 500 Index in several years.
| Year | VXUS Return | S\&P 500 Return |
| —- | ———– | —————- |
| 2011 | -14.45% | -0.00% |
| 2012 | 18.17% | 16.00% |
| 2013 | 15.52% | 32.39% |
| 2014 | -4.88% | 13.69% |
| 2015 | -0.81% | 1.38% |
As you can see, VXUS has experienced some volatility in the past, but it has also provided investors with competitive returns over the long term.
Risk Factors to Consider
While VXUS can be a good long-term investment, there are some risk factors to consider:
- Market Risk: As with any investment, there’s a risk that the value of VXUS could decline due to market fluctuations.
- Currency Risk: Since VXUS invests in international stocks, there’s a risk that changes in currency exchange rates could negatively impact the fund’s performance.
- Emerging Market Risk: VXUS invests in emerging markets, which can be more volatile than developed markets.
Who is VXUS Suitable For?
VXUS can be a good long-term investment for:
- Long-term investors: VXUS is suitable for investors who have a time horizon of five years or more and are willing to ride out market fluctuations.
- Diversification seekers: VXUS can be used to diversify a portfolio that’s heavily weighted towards US stocks.
- Low-cost investors: VXUS has a low expense ratio, making it an attractive option for investors who are looking to minimize their costs.
How to Invest in VXUS
Investing in VXUS is relatively straightforward. You can purchase shares of the ETF through a brokerage account or a robo-advisor. Some popular brokerage accounts that offer VXUS include:
- Fidelity
- Vanguard
- Charles Schwab
- Robinhood
Conclusion
In conclusion, VXUS can be a good long-term investment for investors who are looking to diversify their portfolios and gain exposure to international stocks. While there are some risk factors to consider, the fund’s low costs, tax efficiency, and flexibility make it an attractive option for long-term investors. As with any investment, it’s essential to evaluate your individual financial goals and risk tolerance before investing in VXUS.
By adding VXUS to your portfolio, you can potentially increase your returns and reduce your risk over the long term. However, it’s essential to remember that past performance is not a guarantee of future results, and it’s always a good idea to consult with a financial advisor before making any investment decisions.
What is VXUS and how does it work?
VXUS is an exchange-traded fund (ETF) that tracks the performance of the FTSE All-World ex US Index, which includes stocks from developed and emerging markets outside the United States. By investing in VXUS, you gain exposure to a broad range of international stocks, allowing you to diversify your portfolio and potentially reduce risk.
The fund is designed to provide long-term growth by investing in a representative sample of stocks from the underlying index. VXUS holds a portfolio of over 7,000 stocks from more than 40 countries, giving you a truly global perspective. The fund is managed by Vanguard, a well-respected investment management company known for its low-cost index funds.
What are the benefits of investing in VXUS?
One of the primary benefits of investing in VXUS is its diversification potential. By investing in international stocks, you can reduce your reliance on the US market and potentially increase your returns over the long term. Additionally, VXUS provides exposure to emerging markets, which can offer higher growth potential than developed markets.
Another benefit of VXUS is its low cost. The fund has an expense ratio of 0.08%, which is significantly lower than many actively managed international funds. This means that you get to keep more of your returns, rather than paying high fees to a fund manager. Overall, VXUS offers a low-cost, diversified way to invest in international stocks.
What are the risks of investing in VXUS?
As with any investment, there are risks associated with investing in VXUS. One of the primary risks is market volatility. International markets can be more volatile than the US market, and VXUS may experience significant price swings. Additionally, there are risks associated with investing in emerging markets, such as political instability and currency fluctuations.
Another risk to consider is currency risk. Since VXUS invests in international stocks, the value of your investment may be affected by changes in currency exchange rates. If the US dollar strengthens against other currencies, the value of your investment in VXUS may decline. However, this risk can also work in your favor if the US dollar weakens.
How does VXUS compare to other international ETFs?
VXUS is one of the largest and most popular international ETFs available. Compared to other ETFs, VXUS has a low expense ratio and a broad portfolio of stocks. It also has a long track record of performance, having been launched in 2011. However, there are other ETFs that may offer similar exposure to international stocks, such as the iShares MSCI ACWI ex US ETF (ACWX).
When comparing VXUS to other ETFs, consider factors such as expense ratio, portfolio composition, and trading volume. You may also want to consider the investment objectives and strategies of the fund, as well as its performance history. Ultimately, the best ETF for you will depend on your individual investment goals and risk tolerance.
Is VXUS a good investment for beginners?
VXUS can be a good investment for beginners due to its broad diversification and low cost. The fund provides exposure to a wide range of international stocks, which can help reduce risk and increase potential returns over the long term. Additionally, the fund is easy to buy and sell, with a high trading volume and a low expense ratio.
However, as with any investment, it’s essential to do your research and consider your individual financial goals and risk tolerance before investing in VXUS. You may also want to consider consulting with a financial advisor or conducting your own research before making a decision. Ultimately, VXUS can be a good addition to a diversified portfolio, but it’s essential to understand the risks and benefits before investing.
Can I use VXUS as a core holding in my portfolio?
Yes, VXUS can be used as a core holding in your portfolio due to its broad diversification and low cost. The fund provides exposure to a wide range of international stocks, which can help reduce risk and increase potential returns over the long term. Additionally, the fund is designed to track a representative sample of the underlying index, which means that it can be used as a core holding in a portfolio.
When using VXUS as a core holding, consider combining it with other low-cost index funds or ETFs to create a diversified portfolio. You may also want to consider your individual investment goals and risk tolerance, as well as your overall asset allocation. By using VXUS as a core holding, you can create a low-cost, diversified portfolio that is designed to provide long-term growth.
How do I buy VXUS?
You can buy VXUS through a brokerage account or an online trading platform. The fund is listed on the New York Stock Exchange Arca (NYSE Arca) and can be traded throughout the day. To buy VXUS, you’ll need to open a brokerage account and deposit funds into it. You can then place an order to buy the fund through your online trading platform or by contacting your broker.
When buying VXUS, consider the trading volume and the bid-ask spread, as these can affect the price you pay for the fund. You may also want to consider setting a limit order or a stop-loss order to help manage your risk. Additionally, be sure to review the fund’s prospectus and understand the risks and benefits before investing.