Diversifying Portfolios Made Easier: Vanguard's All-Encompassing International Stock ETF for 2025 Investment Diversification
Diversifying your investment portfolio isn't just about avoiding putting all your eggs in one basket. It's about spreading your investments across various assets and markets to enhance potential returns and reduce risk. One smart way to diversify is by adding international exposure, and Vanguard makes this easy with their Vanguard Total International Stock ETF (VXUS).
Let's break it down: Why diversify? Consider the S&P 500, which is mostly U.S. stocks. Sure, it's got loads of individual stocks, but not all of them perform equally at the same time. To maximize returns, you might focus on the Magnificent Seven, those top performers. But predicting the future is tricky, and there's only one crystal ball on Wall Street, and that's definitely not in your possession.
Diversifying means your portfolio might include some duds, but the winners should hopefully balance out the losers. Think of it like a team sport, where every player has their strengths and weaknesses. Some days, that star player might miss the shot, but that's okay because another player might score a slam dunk instead.
Now, we're not just talking about the U.S. Here's where the VXUS comes in. This ETF buys over 8,000 international stocks, providing exposure to emerging markets, Europe, and the Pacific. That means you're spreading your bets across an array of global companies, which is often going to perform differently from U.S.-based stocks.
The best part? VXUS has a low expense ratio, just 0.08%. That's a small price to pay for the potential risk reduction and increased diversification it offers.
Remember, though, the mix is important. You don't need to jump in with both feet and go all-in on international stocks. Simply layer in some exposure, maybe 20-25% of your stock allocation, to diversify further and potentially smooth out portfolio returns.
Bonus points: Adding international stocks can also help reduce home-country bias, diversify your asset class, and lower your portfolio's overall risk.
[1] Source: Vanguard Research[3] Source: Vanguard Investor Insights[5] Source: Investopedia
Enrichment Insights:1. Global Market Exposure: VXUS tracks the FTSE Global All Cap ex US index, providing exposure to over 8,000 international stocks from emerging markets, Europe, and the Pacific.2. Reducing Home-Country Bias: By excluding U.S. stocks, VXUS helps to mitigate home-country bias.3. Diversifying Asset Class: VXUS is an equity-based ETF, providing exposure to the growth potential of international companies.4. Lower Correlation with U.S. Markets: International stocks often have lower correlation with U.S. stocks, which can help smooth out portfolio returns.5. Lower Expense Ratio: With a net expense ratio of 0.08%, VXUS is a cost-effective way to gain international exposure.6. Diversifying Sector Exposure: VXUS includes a wide range of sectors, which can help spread risk across different industries.
- To diversify further and potentially enhance return, consider adding international exposure to your investment portfolio, such as Vanguard's Vanguard Total International Stock ETF (VXUS), which has a low expense ratio of 0.08%.
- By investing in international stocks through the VXUS ETF, you can diversify your asset class and reduce home-country bias, which could lead to lower portfolio risk.
- Known for its extensive global market exposure, the VXUS ETF buys over 8,000 international stocks from emerging markets, Europe, and the Pacific, providing an average investment opportunity in various global companies.
- To keep the risks involved at a minimum, consider adding a small percentage, say 20-25%, of your stock allocation to international stocks, such as those included in the Vanguard Total International Stock ETF (VXUS).