Market Overview

Maybe Not The ETF You Want Right Now, But Don't Forget About It

Maybe Not The ETF You Want Right Now, But Don't Forget About It

With U.S. stocks being drubbed at the hands of the COVID-19 outbreak, investors are forgiven if they've suddenly become jittery regarding international equities. That doesn't mean either group should be outright forsaken.

What Happened

The Vanguard Total International Stock ETF (NASDAQ: VXUS) slumped 3.7% on Monday on volume that was nearly double the daily average. Alone, those statistics would be enough to indicate VXUS may not be a near-term buy. VXUS's first close below its 200-day moving average since October only adds to the concerns.

If and when the COVID-19 scenario is put to rest, however, VXUS is an exchange traded fund many investors will want to remember for broad, cost-effective international equity exposure.

“A comprehensive fund like Vanguard Total International Stock ETF provides an excellent base for building an allocation to non-U.S. stocks,” Morningstar said in a recent note. “It covers the entire investable market outside of the U.S., giving investors access to stocks of all sizes.”

See Also: These Vanguard ETFs Just Got Cheaper

Why It's Important

VXUS tracks the FTSE Global All Cap ex US Index, “which measures the investment return of stocks issued by companies located outside the United States,” according to Vanguard.

The $18.8 billion ETF has many of the hallmarks of Vanguard funds advisors and investors have come to know and love, including a deep bench — 7,449 holdings to be precise — and a low fee — 0.09% per year, or $9 on a $10,000 investment.

“This is one of the broadest portfolios in the foreign large-blend Morningstar Category. Its exceptional diversification mitigates the impact of holding the worst-performing names,” said Morningstar. “It owns more than 7,000 stocks and has only 8% of assets in its 10 largest positions. Its regional composition looks modestly different from the typical fund in the category because it has a larger dose of emerging-markets stocks.”

VXUS allocates 22.5% of its weight to emerging markets equities with China being the top geographic exposure on that front at 8.2%. Japan is the fund's biggest overall geographic weight at 16.7%.

What's Next

While international stocks clearly aren't screaming buys at the moment, VXUS does hold promise for long-term investors.

“This fund's broad portfolio and relatively low fee should help it perform better within the category when foreign markets post stronger returns,” said Morningstar.

The research firm has a Gold rating on the fund.


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