VOO vs VXUS: Which ETF is the Better?LAST UPDATED: June 13, 2023 | By Conrad Golly
Over the past decade, VOO has outperformed VXUS with an average annual return of 12.19%, while VXUS has yielded a comparatively lower 4.62% annualized return. However, past performance does not guarantee future results, and investors should consider their investment goals, risk tolerance, and time horizon before making a decision.
VOO vs VXUS are two popular exchange-traded funds (ETFs) that investors often compare. VOO, or the Vanguard S&P 500 ETF, tracks the S&P 500 index, which consists of 500 large-cap U.S. equities.
VXUS, or the Vanguard Total International Stock ETF, tracks the FTSE Global All Cap ex US index, which includes large, mid, and small-cap equities from developed and emerging markets outside of the United States.
- VOO tracks the S&P 500 index, while VXUS tracks the FTSE Global All Cap ex US index.
- VOO has outperformed VXUS over the past decade, but past performance does not guarantee future results.
- Investors may consider adding VXUS to their portfolio for diversification, lower expense ratio, and higher dividend yield.
Summary VOO vs VXUS
Investors who want to diversify their portfolio beyond U.S. equities may consider adding VXUS to their holdings. VXUS provides exposure to developed and emerging markets, which may have different levels of volatility and growth potential compared to U.S. equities.
Additionally, VXUS has a lower expense ratio and a higher dividend yield compared to VOO. However, investors should also consider the tax implications of holding international equities and the potential impact of currency fluctuations on their returns.
When comparing VOO and VXUS, investors often look at performance, portfolio diversification, expense ratio and dividend yield, and future results.
VXUS vs VOO Summary Table
Here’s a table comparing VOO and VXUS based on their key attributes:
|VOO (Vanguard S&P 500 ETF)||VXUS (Vanguard Total International Stock ETF)|
|Index Tracked||S&P 500||FTSE Global All Cap ex US|
|Geographical Focus||United States||Developed and Emerging Markets (ex US)|
|Asset Class||U.S. Equities||International Equities|
|Performance||10-Year Average Annual Return: 12.19%||10-Year Average Annual Return: 4.62%|
|Risk||Exposure to U.S. Market||Exposure to International Markets|
What is VOO?
VOO is an ETF (Exchange Traded Fund) that tracks the performance of the S&P 500 Index. It is managed by Vanguard, one of the world’s largest investment firms, and is designed to provide broad-market exposure to U.S. large-cap stocks.
The fund was launched in 2010 and has since become one of the most popular ETFs in the market. It is known for its low expense ratio of 0.03%, which is significantly lower than the average expense ratio of other large-cap ETFs.
This makes it an attractive option for investors who want to invest in the S&P 500 without paying high fees.
In terms of performance, VOO has delivered strong returns over the years. As of June 2023, the fund has generated an average annual return of around 15% since its inception. However, it is important to note that past performance is not a guarantee of future results.
In addition to its strong performance, VOO also has a relatively low dividend yield of around 1.89%, which may be a downside for investors who are looking for higher dividend income.
What is VXUS?
VXUS is an ETF offered by Vanguard that provides exposure to international equities. The fund tracks the FTSE Global All Cap ex US Index, which includes stocks of companies located in developed and emerging markets outside of the United States.
VXUS invests in a diversified portfolio of foreign large blend stocks, meaning it holds a mix of value and growth stocks of large-cap companies in foreign markets.
One of the key benefits of investing in VXUS is the diversification it offers to investors. By investing in international markets, investors can potentially reduce the overall risk of their portfolio by spreading their investments across different markets and companies.
Additionally, investing in VXUS can provide investors with exposure to companies and industries that may not be available in the US market.
In terms of performance, VXUS has provided investors with competitive returns over the years. However, it is important to note that the performance of the fund can be impacted by various factors such as geopolitical events, economic conditions, and currency fluctuations.
VXUS has an expense ratio of 0.07%, which is higher than VOO’s expense ratio of 0.03%. However, this is still considered low compared to other international ETFs. The fund also has a dividend yield of around 3.07%, which is higher than VOO’s dividend yield of 1.93%.
Performance Comparison VOO vs VXUS
When comparing VOO and VXUS, the first thing that comes to mind is their performance. VOO is an ETF that tracks the S&P 500 index and invests in the 500 largest US companies, while VXUS invests in international stocks.
Over the past decade, VOO has outperformed VXUS with an average annual return of 12.19%, compared to VXUS’s 4.62%.
However, it’s worth noting that past performance is not a guarantee of future results, and investors should always consider the risks associated with investing in any security.
In terms of returns, VOO has had a strong year so far, with a year-to-date return of 16.25%, compared to VXUS’s 10.34%. This is largely due to the strong performance of the US stock market in recent months.
It’s also important to note that VOO has a lower expense ratio compared to VXUS, which could be a factor for some investors. VOO has an expense ratio of 0.03%, while VXUS has an expense ratio of 0.08%.
Portfolio Diversification VOO vs VXUS
Diversification is a key component of any well-balanced portfolio. It is essential to spread your investments across different asset classes, sectors, and geographic regions to reduce risk and increase returns.
When it comes to equity investments, it is essential to diversify not only across different sectors but also across different markets. The VOO and VXUS ETFs are excellent options for investors looking to diversify their portfolios across broad-market equities.
VOO offers exposure to the largest 500 companies in the US, while VXUS provides exposure to developed and emerging markets outside the US. VXUS tracks the FTSE Global All Cap ex US Index, which includes large, mid, and small-cap stocks from more than 6,000 companies in 46 countries.
Investing in both VOO and VXUS can provide investors with broad exposure to both US and international markets, making it an excellent way to diversify a portfolio.
It’s worth noting that VXUS is classified as a foreign large blend ETF, which means it invests in a mix of large-cap and mid-cap stocks from developed and emerging markets. In contrast, VOO is a large-cap blend ETF that invests in the largest 500 companies in the US.
When it comes to fixed income, investors may want to consider adding other asset classes, such as bonds, to their portfolio to further diversify. However, for investors who wish to focus solely on equities, investing in both VOO and VXUS can provide a well-diversified portfolio.
Expense Ratio and Dividend Yield VOO vs VXUS
One of the most important factors to consider when comparing VOO and VXUS is their expense ratio and dividend yield.
Expense Ratio Comparison: VOO has a lower expense ratio of 0.03% compared to VXUS’s 0.07%. This means that VOO investors pay less in fees for managing their investment. However, it is important to note that both VOO and VXUS have relatively low expense ratios compared to other ETFs.
Dividend Yield Comparison: VXUS has a higher dividend yield of 3.06% compared to VOO’s 1.89%. This means that VXUS investors receive a higher payout in dividends per share than VOO investors. However, it is important to note that high dividend yields do not always indicate a better investment option.
Investors should consider their investment goals and risk tolerance when deciding between VOO and VXUS. VOO may be a better option for those seeking exposure to the US market with a lower expense ratio, while VXUS may be a better option for those seeking exposure to international markets with a higher dividend yield.
It is also important to note that both VOO and VXUS are issued by Vanguard, a reputable investment management company known for its low-cost index funds and ETFs.
Vanguard Total International Stock ETF (VXUS) is a diversified fund that tracks the performance of the FTSE Global All Cap ex US Index, while VOO tracks the performance of the S&P 500 Index.
Recommendation and Future Results VOO vs VXUS
Based on the information presented, it is clear that both VOO and VXUS have their own unique advantages and disadvantages. VOO offers exposure to the top 500 US stocks, while VXUS provides diversification across international markets.
For passive investors who are looking for long-term stock and bond investments, both VOO and VXUS can be good choices. The compounding effect of these indexed mutual funds can lead to significant gains over time.
However, it is important to note that past performance is no guarantee of future results. While VOO has outperformed VXUS in recent years, this trend may not continue in the future. Active managers may also be able to identify undervalued stocks that can outperform the market.
For those who choose to invest in VOO and VXUS, it is important to regularly rebalance the portfolio to maintain the desired asset allocation. Additionally, seeking tax advice can help minimize taxes on any gains realized from these investments.
Accuracy and Completeness VOO vs VXUS
When comparing VOO and VXUS, it is important to consider the accuracy and completeness of the information available. Both ETFs are managed by Vanguard, a reputable dealer in the investment industry. Vanguard is known for providing accurate and reliable information to its investors.
The prices of VOO and VXUS are updated in real-time, ensuring that investors have access to the most up-to-date information. This timeliness is important for investors who need to make informed decisions quickly.
In terms of completeness, both VOO and VXUS offer exposure to a wide range of stocks. VOO tracks the S&P 500 index, which includes 500 of the largest companies in the US. VXUS, on the other hand, tracks the FTSE Global All Cap ex US Index, which includes stocks from developed and emerging markets outside of the US.
Investors who are looking for exposure to the US market may find VOO to be a more suitable option, while those who want exposure to international markets may prefer VXUS. It is important to note, however, that neither ETF provides complete global market coverage.
Verdict: VOO vs VXUS
Both VOO and VXUS are popular ETFs offered by Vanguard that provide exposure to the US and international markets, respectively. While VOO tracks the S&P 500 index and is focused on large-cap US companies, VXUS tracks the FTSE Global All Cap ex US Index and provides exposure to a broader range of international stocks.
Investors looking to diversify their portfolio beyond the US market may consider investing in VXUS. However, it is important to note that investing in international markets may carry additional risks such as currency fluctuations and political instability.
Here are some key takeaways to consider when deciding between VOO and VXUS:
- VOO may be a better choice for investors looking for exposure to large-cap US companies, while VXUS may be a better choice for those looking to diversify their portfolio with exposure to international stocks.
- VOO has a lower expense ratio than VXUS, which may make it more attractive to cost-conscious investors.
- Both ETFs have performed well historically, but past performance is not a guarantee of future results.
Before you go…
FAQs: VOO vs VXUS
Q: What Fund Is VXUS Equivalent To?
A: VXUS is an exchange-traded fund (ETF) that tracks the performance of the FTSE Global All Cap ex US Index. It provides exposure to a wide range of international stocks, excluding the United States.
Q: Is VXUS A Good Long-Term Investment?
A: Evaluating the suitability of VXUS as a long-term investment depends on individual financial goals, risk tolerance, and investment strategy. It can be a valuable component of a well-rounded investment portfolio, especially for investors seeking global exposure and long-term growth potential.
Q: Is VXUS Better Than VTI?
A: The choice between VXUS and VTI depends on an investor’s specific investment objectives.
Q: Why Is VXUS Good?
A: VXUS provides exposure to a broad range of international stocks, allowing for diversification across global markets.
Q: Is It Better To Invest In VTI Or VOO?
A: Choosing between VTI and VOO depends on an investor’s specific investment goals and preferences. The decision between the two should be based on an individual’s investment strategy, risk tolerance, and desired exposure to different segments of the U.S. stock market.