Global Exposure With Major Differences

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The first thing investors should know is that, because these are both Vanguard funds, the fees are generally low, and in this case, they are comparable as well. That said, VXUS stands out as potentially more attractive for a few reasons. First, it carries a slightly lower fee than VT, but it has also performed better over the past twelve months, and its dividend yield is significantly higher.

However, those factors should not be the only thing investors pay attention to, as these ETFs are fundamentally different in their composition. VT carries exposure to the equities from around the world, which includes a 63% exposure to stocks from the United States. This could be an attractive feature for those seeking international exposure, in addition to the opportunity to invest in U.S. stocks.

On the other hand, VXUS is a fund that specifically invests only in markets outside the United States. This fund could be appropriate for those who have a heavy exposure to U.S. equities in other parts of their portfolio and are looking for an easy way to gain diversified exposure to international markets.

Considering these substantial differences, a decision between the two funds should extend beyond performance and dividend yield. Each of these ETFs can serve a specific role in a portfolio and should be considered based on what each investor is trying to accomplish.

ETF: Exchange-traded fund; a pooled investment fund that trades on stock exchanges like a single stock.Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its current price.Beta: A measure of an investment’s volatility compared to the overall market, typically the S&P 500.AUM: Assets under management; the total market value of assets a fund manages for investors.Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.Sector exposure: The proportion of a fund’s holdings invested in specific industries or sectors.Passively managed: A fund that aims to replicate the performance of an index rather than actively selecting investments.Index: A benchmark that tracks the performance of a group of securities, such as stocks or bonds.Developed markets: Countries with advanced economies and established financial markets, like the US, UK, or Japan.Emerging markets: Nations with developing economies and less mature financial markets, often offering higher growth potential.

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Jeff Santoro has positions in ASML, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Tencent, and Vanguard Total International Stock ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

VXUS vs. VT: Global Exposure With Major Differences was originally published by The Motley Fool