VXUS vs VEU - Which Ex-US ETF is Better Overall?

Vanguard ETF Comparison VXUS vs VEU

In this article, we will be talking about the differences between two ex-U.S. ETFs that are offered by Vanguard: VXUS and VEU. First, we will give you some background information on the advantages and disadvantages of each fund to help you decide on which would be better for your needs.VXUS vs VEU]

To give a brief overview and summarize before getting into specifics: VXUS and VEU are very similar overall with identical expense ratios (0.08% annually) and nearly identical historic returns, however VXUS offers greater diversification due to holding over 7400 stocks, while VEU holds just under 3500.

Overall we’d opt for having some exposure to VXUS and then having larger exposure to one of Schwab’s funds (SCHF) due not only to its outperformance relative to VXUS and VEU, but also to diversify risk in the case of ETF issuer Bankruptcy.

What Similarities Do VXUS and VEU Have?

  • The expense ratios for both VXUS and VEU are 0.08% per year, which is a standard low Expense Ratio found in most Vanguard’s ETFs.

    -VXUS and VEU have identical historic returns of about 8% -> 9% per year over the past 15 years with within a +/- 1% return difference from one another in any given year.

  • VXUS has a total fund size of $381.8 billion, while VEU has a total fund size of $49.4 billion.

  • VXUS and VEU are both Ex-US international ETF funds with similar holdings

  • Both Funds have a dividend yield of about 2%, with VXUS yield being slightly higher on average

  • VXUS and VEU have nearly identical geographical exposure, both having approximately 38% of the fund invested in Europe, 26% in emerging markets, 28% in the APAC region, with the remaining 8% or so being spread amongst the Middle East and Americas.

What's The Difference Between VXUS and VEU?

  • VXUS holds 7420 different stocks while VEU holds 3470 different stocks, meaning VXUS has better diversification

  • VXUS has exposure to Small and Medium-Cap companies while VEU is exclusively filled with Large-Cap companies

  • VXUS has a larger fund size of $381.8 billion, while VEU has a fund size of $49.4 billion

  • VXUS has greater liquidity due to having around 2x as many shares change hands every day compared to VEU

VXUS vs VEU - Which Is The Better Investment?

To get to the point – VXUS is the superior fund due to its more diversified portfolio, but I’d argue that the difference between them isn’t too significant, so if you’ve already purchased VEU, especially if you have significant gains on it, it’s likely not worth the tax bother of selling VEU simply to swap it out for VXUS or another similar fund.

If you are looking for an alternative ex-US Internationally-focused ETF with better historic performance than both VXUS or VEU, then I would recommend Schwab’s SCHF (Schwab International Equity ETF). You can read our comparison of SCHF versus VXUS by clicking here, but to put it simply: lower fees, higher returns, and more exposure to hard-to-acquire stocks like Samsung or Nestle.

What Other Ex-US ETF's Are Worth Considering?

As we mentioned above SCHF is another great ex-US ETF, but there are also some other options worth looking into as well. I’d recommend checking out either iShares or SDPR’s offerings depending on what you’re looking for, although I prefer Schwab and Vanguard when it comes to broad ETF’s – although being honest there’s little difference between Vanguard and Ishares ETFs; generally the like-kind ETFs hold like-kind stocks/assets.

I’d say consider looking at Ex-US ETF’s that are NOT total-market ETFs, but instead ones that target specific countries such as Ticker: EWU, which is a total UK-focused ETF, or EFNL which is a total Finnish ETF.

Personally I opt for south-east Asian countries ETFs as well as some South-American ETFs, as I believe they’re where the most growth and opportunities are outside the US. A personal favorite of mine is THD – Ishares Thailand-focused ETF.

How Much of Your Portfolio Should Be In International Stocks?

I, unfortunately, am not an all-powerful being who knows how much international exposure you need in your portfolio, nor am I an investment advisor, and thus I can’t give you investment advice.

For me I aim to have a lot of international exposure, as I do not live in the United States full-time anymore – the way I see it is that if I live in Thailand a lot, which I have in the past and plan to in the future, I should have stocks and earnings from there – so even though I am not a Thai Citizen I should have some exposure to the Thai market, as when I live there a lot of my expenses will be denoted in Thai baht.

Should You Buy Individual Stocks from Abroad?

Once again, I am not an all-powerful being who knows your risk tolerance or in fact anything about you – nor am I your financial advisor, and thus I can’t give you investment advice.

Buying individual stocks directly from a foreign country can be a good idea, or it can be a terrible idea. Personally I do buy some individual foreign stocks, but generally the companies release much less information, aren’t as transparent, and as a foreigner you rarely will truly understand the market in the foreign country, and thus have no real edge in picking stocks — so generally it’s a bad idea for most people.