Many of the world’s largest companies, such as Samsung Electronics, Saudi Aramco, and Kweichow Moutai, are not listed on US exchanges. Investors interested in these firms must trade their shares on international stock exchanges, which involves currency conversions and additional complexities. With the growing prominence of multinational corporations outside the US, some companies may opt to remain listed in their domestic markets due to various economic and regulatory reasons. This situation presents challenges for US investors seeking exposure to these global firms.
Exchange-Traded Funds (ETFs) have long provided a way for investors to access international markets without direct foreign investments. Vanguard, one of the largest asset managers, offers several ETFs that provide exposure to international markets, including the Vanguard FTSE Developed Markets ETF (NYSE: VEA) and Vanguard FTSE All-World ex-US ETF (NYSE: VEU). These funds aim to track broad international indices and contain stocks from various regions, allowing for diversification.
What Does Vanguard FTSE Developed Markets ETF Offer?
Vanguard FTSE Developed Markets ETF (VEA) includes a mix of large-cap and mid-cap stocks from regions such as Canada, Europe, the Middle East, and the Pacific Rim. The fund was launched in 2007 and tracks the MSCI Developed All Cap ex US Index. With net assets amounting to approximately $191.39 billion, VEA provides exposure to companies like ASML Holding NV, Novo Nordisk A/S, and Toyota Motor Corp. It allocates a significant portion of its holdings to financial services, industrials, and technology sectors.
How Does Vanguard FTSE All-World ex-US ETF Compare?
Vanguard FTSE All-World ex-US ETF (VEU), launched in March 2007, tracks the FTSE All-World ex-US Index. This ETF covers a broader range of stocks, including those from emerging markets, in addition to developed regions. With net assets of $55.84 billion, VEU holds companies such as Taiwan Semiconductor, Tencent Holdings, and SAP SE. The fund has a notable allocation to emerging markets, which distinguishes it from VEA. Financial services, technology, and industrials make up a large portion of its sector distribution.
When comparing these funds, VEU has a higher exposure to emerging markets, particularly with its positions in Taiwan Semiconductor and Tencent Holdings. VEA, on the other hand, has a heavier weighting in Europe. Both ETFs have similar expense ratios and dividend yields, with minor differences in historical performance. Investors looking for growth potential in emerging markets might lean towards VEU, while those seeking stability in developed economies could prefer VEA.
Taiwan Semiconductor plays a key role in VEU’s portfolio, given its significance in semiconductor manufacturing and AI developments. Tencent Holdings, another major component of VEU, has diversified interests spanning gaming, fintech, and entertainment. These factors contribute to VEU’s potential for higher volatility but also increased growth opportunities. Meanwhile, VEA’s larger allocation to European companies offers a different risk-return profile, particularly given ongoing economic shifts in the region.
Investors choosing between VEA and VEU should consider their risk tolerance, market outlook, and investment objectives. VEA offers more exposure to established economies, while VEU provides access to potentially high-growth emerging markets. Both ETFs provide diversification and ease of trading in US markets, making them viable options for investors looking to expand their portfolios beyond domestic stocks.
