Vanguard International ETFs: A Comprehensive Overview

Vanguard International ETFs offer a wide range of investment options for those looking to diversify their portfolios globally.

These ETFs cover various regions, including the developed markets of Europe and the Pacific, as well as the emerging markets of Asia and Latin America.

Each ETF is designed to track a specific index, such as the FTSE Developed All Cap ex US Index, providing investors with a cost-effective way to gain exposure to international markets.

With over 80% of the world's market capitalization outside the US, investing in international markets can help reduce risk and increase potential returns.

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Getting started with Vanguard international ETFs requires some planning. Depending on your financial goals, asset allocation, and risk tolerance, you'll need to determine how much of your portfolio to allocate to international stocks.

For most investors, passively managed international ETFs are a great option. They provide automatic diversification and free you from constantly monitoring market developments.

You'll need to decide what percentage of your total portfolio allocation you'll invest in international stocks or bonds. Vanguard recommends investing up to 40% of your total equity allocation in international stocks.

A good rule of thumb is to allocate a portion of your portfolio to international stocks. For example, if you have $10,000 in stocks, up to $4,000 could be allocated to international stocks, according to Vanguard's recommendation.

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There are several ways to invest in foreign markets, including international ETFs, global or world funds, regional funds, developed markets funds, and emerging markets funds.

To narrow down your options, consider the key features of each investment type. For example, international ETFs invest only in foreign markets, excluding the United States.

Here are some factors to consider when choosing an investment:

International ETFs can add another layer of diversification to your overall portfolio, and it's generally suggested to choose international investments for about 30% of the bond portion and 40% of the stock portion of your portfolio.

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There are several types of international investments to consider, including international ETFs, global or world ETFs, regional ETFs, developed markets ETFs, and emerging markets ETFs. International ETFs invest only in foreign markets, excluding the United States, while global or world ETFs provide exposure to both foreign and U.S. markets.

To choose an international investment, consider the type of investment that suits your financial needs. You can choose from international funds, global or world funds, regional funds, developed markets funds, and emerging markets funds.

Some key factors to consider when choosing an international ETF include expense ratios and fees, assets under management (AUM), fund issuer, fund performance, trading volume, and ETF top holdings.

Here are some factors to consider when evaluating international ETFs:

By considering these factors and doing your own research, you can make an informed decision about which international ETF is right for you.

Vanguard recommends investing at least 20% of your overall portfolio internationally.

Investing through mutual funds or ETFs is often the easiest and most cost-effective option.

For international stocks, consider investing about 40% of your stock allocation.

Investing 30% of your bond allocation internationally can also provide diversification benefits.

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Investing in US stocks can be a good choice, but it's essential to consider the risks of "home bias", or holding too much of your portfolio in domestic assets. This can dilute the benefits of diversification when trends change.

The US market has outperformed international stocks over the past decade, thanks in part to solid gains in the technology sector. However, this trend may not continue.

Historical fluctuations in market leadership show that the US and international stocks tend to alternate in performance. For example, until the 2008 global financial crisis, international markets led the way.

International markets could retake the lead due to factors like technological advancements, supply chain reliance, and global economic shifts.

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International ETFs can add another layer of diversification to your overall portfolio, and we suggest choosing them for about 30% of the bond portion and 40% of the stock portion.

You can invest in foreign markets through various types of ETFs, including international ETFs that invest only in foreign markets, global or world ETFs that provide exposure to both foreign and U.S. markets, regional ETFs, developed markets ETFs, and emerging markets ETFs.

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There are five main types of international ETFs: international, global, regional, developed markets, and emerging markets. These types of ETFs offer varying levels of exposure to foreign markets, from broad international exposure to more focused regional or country-specific investments.

Here are some key features to consider when choosing an international ETF:

Investing in international ETFs can be a great way to diversify your portfolio, and it's actually quite straightforward. You can gain exposure to a wide range of investment themes with a low-cost option.

International ETFs offer two main options for how securities are selected: Passive and actively managed funds. Passive management is the most common approach.

A passively managed ETF buys a basket of international stocks that make up a broad index, like the FTSE All-World ex-US index, which includes over 3,000 stocks from 48 countries, excluding the U.S. This process eliminates the need for fund managers to select individual companies at their discretion.

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Management fees for passively managed ETFs are usually low, often less than 0.1%. The Vanguard FTSE All-World ex-US ETF (VEU) is a good example of this.

An actively managed ETF, on the other hand, invests in a specific type of security, such as government and corporate bonds denominated in emerging market currencies, like the WisdomTree Emerging Markets Local Debt Fund (ELD).

The Vanguard FTSE Developed Markets ETF (VEA) is a popular option for investors seeking to only invest in Developed Markets. It tracks the FTSE Developed All Cap ex US Index, with over 4,010 holdings and an expense ratio of just 0.05%.

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Diversification is a key strategy to lower your chances of losing money on your investments. By spreading your investments across different asset classes, holdings, and geographic regions, you can reduce your risk and increase potential returns.

A combination of cash, bonds, and stocks can provide a solid foundation for diversification. For example, you can invest in a mix of U.S. and international investments to cover different markets.

You can achieve diversification by buying many bonds and stocks instead of just one or a few. This is where exchange-traded funds (ETFs) come in handy, as they allow you to buy a single ETF that tracks a broad index, such as the FTSE All-World ex-US index, which includes over 3,000 stocks from developed and emerging markets.

Some examples of international ETFs that can help with diversification include the Vanguard FTSE All-World ex-US ETF (VEU) and the Vanguard FTSE Developed Markets ETF (VEA). These funds have low expense ratios and are highly liquid, making them attractive options for investors.

Here are some ways to diversify your portfolio:

By diversifying your portfolio, you can reduce your risk and increase potential returns. Remember to consider investing at least 20% of your overall portfolio in international stocks and bonds to get the full benefits of diversification.

International ETFs can add another layer of diversification to your overall portfolio.

You can choose international investments for about 30% of the bond portion of your portfolio.

International ETFs can also make up about 40% of the stock portion of your portfolio for added diversification.

International stocks offer a diversification benefit by not being perfectly correlated to the U.S. market, thereby lowering portfolio volatility and risk.

U.S. stocks comprise only about 50% of the global stock market, leaving a significant portion of investment opportunities in international markets.

Top target date funds now allocate over 30% of equities positions to ex-US stocks, showing a growing recognition of international stocks' potential.

International stocks outperformed the U.S. in the years 1986–1988, 1993, 1999, 2002–2007, 2012, and 2017, making them a compelling addition to a portfolio.

International bonds may offer a small diversification benefit in terms of credit risk due to their low correlation with both U.S. stocks and U.S. bonds.

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International markets are generally divided into two categories: developed markets and emerging markets. Developed markets are located in countries with established industries, widespread infrastructure, secure economies, and a relatively high standard of living.

Examples of developed markets include the United Kingdom, Japan, Australia, Canada, and France. These countries have a relatively stable economy and a high standard of living.

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Emerging markets, on the other hand, are located in countries with developing capital markets and less-stable economies. They're considered to be in the process of transitioning into developed markets, and they may be experiencing rapid growth.

Examples of emerging markets include India, China, Egypt, South Africa, Mexico, and Russia. Emerging markets are more volatile than developed markets and have a wider range of potential outcomes.

Here's a breakdown of the main categories:

VWO provides exposure to Emerging Markets via the FTSE Emerging Markets All Cap China A Inclusion Index. This includes countries like China, Taiwan, India, and Brazil.

Emerging Markets comprise about 11% of the global stock market. They're a superior diversifier and have historically paid a significant risk premium.

Investing in Emerging Markets presents opportunities for higher returns than developed economies. However, there's also a greater risk for losses due to frequent economic and political instability.

VWO has a fee of 0.10% and is a popular choice among investors due to its low cost and broad exposure to Emerging Markets.

VWO may be a good option for investors looking to diversify their portfolio and potentially earn higher returns.

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