Diversify Outside the U.S. With This ETF

Many of the largest, most profitable companies are located in the U.S. And it’s likely that investors have much of their portfolios made up of U.S.-based businesses. While there’s nothing wrong with that, diversifying outside of the U.S. market can be a way to bring down your overall risk and give you exposure to some emerging markets.

One exchange-traded fund (ETF) that can help accomplish that is the Vanguard Total International Stock ETF (NASDAQ:VXUS). The fund focuses on “broad exposure across developed and emerging non-U.S. equity markets.” Just under 40% of the portfolio is in European stocks, followed by 27% in the Pacific region, and more than a quarter of the holdings are in emerging markets. With around 7,900 stocks in the ETF, investors are getting significant diversification. And the top 10 holdings account for less than 10% of the fund’s total weight. Some of the top stocks in the ETF include Taiwan Semiconductor Manufacturing (NYSE:TSM), Roche Holding (OTC:RHHBY), and AstraZeneca (NASDAQ:AZN). Investors get all this diversification at a miniscule expense ratio of just 0.07%. The stocks in the ETF are both fairly large and reasonably priced; the median market cap is more than $32 billion and the fund averages a price-to-earnings multiple of less than 13. It also makes quarterly distributions and has a yield of 3.3%.

Year to date, it hasn’t performed a whole lot different than the S&P 500 as they are both down around 14%. The downturn in the stock market of late hasn’t been region-specific as investors have been selling just about everything of late. But for some diversification and a decent yield, this can still be a worthwhile ETF to consider adding to your portfolio.