Vanguard International ETF Face-Off: VXUS vs. VWO
VXUS delivered 20.1% returns over one year while maintaining lower costs, but VWO's emerging-market focus offers distinct growth potential for risk-tolerant investors.
Vanguard offers two international stock ETFs: VXUS and VWO. Both provide low-cost diversification beyond U.S. markets, but they target different regions. VXUS is a broad basket covering all non-U.S. markets, while VWO focuses on faster-growing emerging markets.
Beta, a measure of price volatility compared to the S&P 500, varies between the two ETFs. VXUS has a beta of around 1.03, slightly higher than the market, indicating it tends to be more volatile than the S&P 500. VWO, on the other hand, has a beta closer to 1.00, meaning it generally moves in line with the broader market.
Historically, VWO has outperformed VXUS over the past year. It delivered a total return of approximately 16.2%, compared to VXUS's 11.8%. This difference can be attributed to the higher growth rates in emerging markets over the past year.
However, these differences come with different levels of risk. The higher beta of VXUS means it is more sensitive to market swings. Conversely, VWO's closer beta suggests it may be less volatile than VXUS. Investors must weigh these trade-offs when deciding which ETF aligns with their risk tolerance and investment goals.
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