Vanguard Makes International Investing Cheaper

By on January 31, 2011

On January 26th, Vanguard launched a new ETF based on its Total International Stock Index Fund.   It’s called the Vanguard Total International Stock ETF, symbol VXUS.  The expense ratio is 0.20%; extremely low for an international fund.

Vanguard already had an international ETF;  the Vanguard FTSE All-World ex-US ETF (VEU).  However, VEU is based on a smaller sub-set of larger cap international equities.  It also has a slightly higher expense ratio (0.25%).  VXUS is more diversified amongst smaller cap companies and contains approximately the following allocations; Europe 43%, emerging markets 25%, Pacific 24%, and North America 8%.

Vanguard also has a globally based ETF called the Total World ETF (symbol VT) which includes both international and U. S. stocks.  The expense ratio on VT is 0.30%.

With the addition of VXUS, Vanguard has made it possible to construct a globally based portfolio with the benefits of extreme diversification at an extremely low cost.  Vanguard’s Total Stock Market ETF (U. S. equities, symbol VTI) has a cut-rate expense ratio of 0.07%.  An investor placing 50% of a portfolio’s assets in VTI and the other half in VXUS would have a global portfolio with an overall expense ratio of 0.135%, less than half the expense ratio of its Total World ETF.

Sources: Vanguard, IndexUniverse

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