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.
