If you're worried about the U.S. market this year, one exchange-traded fund (ETF) that you'll want to consider is the Vanguard Emerging Markets Stock Index Fund (NYSE Arca:VWO). It's coming off a great year in 2025 where it rose by 22%, outperforming the S&P 500 which climbed by 16%. This could be the beginning of a potential rotation away from highly valued U.S. equities toward international markets where valuations remain far more attractive.
With a rock-bottom expense ratio of 0.07%, VWO allows investors to capture this growth trend without the drag of high fees, making it one of the most cost-efficient vehicles for accessing the world’s fastest-growing economies.
While U.S. stocks trade at historic premiums, VWO offers exposure to thousands of companies across China, India, Taiwan, and Brazil at significantly lower earnings multiples. The fund is also heavily weighted toward the financial and technology sectors, including industry giants like Taiwan Semiconductor and Tencent, which are well-positioned to benefit from global digitization and the rise and growing adoption of artificial intelligence.
Another great reason to hold onto the ETF is for its above-average yield of around 2.8%. By comparison, the S&P 500 averages a yield of only 1.1%. This ETF can generate some valuable dividend income and also help pad your overall returns from this investment.
If you're looking for a way to diversify outside of U.S. markets, this is an ETF that could be a great option to hold for this year and beyond. For years, international markets have been overlooked, but that could change as investors start to focus more on valuations.
