Beyond the S&P 500: Which International ETF Is the Better Buy in 2026?
If you're looking for international exposure, look no further than this ETF.
For international investors considering ETFs as a core part of their portfolio, two popular choices are the iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Total International Stock ETF (VXUS). Both funds aim to offer diversification beyond U.S. markets, but they differ in their geographical reach and market-cap inclusion, which impacts their cost structures and long-term risk profiles.
The iShares Core MSCI EAFE ETF focuses on developed international markets, excluding the U.S. and Canada. Its portfolio consists of 2,622 stocks across various sectors, with the largest holdings being ASML Holding, HSBC Holdings, and Roche. This fund has a higher dividend yield of 3.41% and was launched in 2012.
On the other hand, the Vanguard Total International Stock ETF provides broader global exposure, including emerging markets and Canada. It holds 8,849 holdings, with key sectors including Financial Services, Technology, and Industrials. The top holdings include Taiwan Semiconductor Manufacturing, Samsung Electronics, and SK Hynix. The Vanguard fund has a lower dividend yield of 2.38% and was established in 2011.
While both funds have shown similar returns over recent years, a closer examination of their geographic exposure reveals Vanguard Total International Stock ETF's advantage. Although the Vanguard fund offers a slightly lower dividend yield, it provides access to several key markets, such as Taiwan, South Korea, Canada, and Brazil.
These countries are poised to benefit from the expanding global AI infrastructure. Taiwan and South Korea are home to major semiconductor companies that are crucial suppliers of advanced chips, memory, and computing hardware. Meanwhile, resource-rich nations like Canada and Brazil offer exposure to commodities like copper, nickel, and aluminum, which are essential for expanding data centers, power infrastructure, and global electrification.
Although investing in the Vanguard Total International Stock ETF exposes investors to additional risks and potential volatility due to its emerging-market exposure, it also presents opportunities for growth that are not available through the iShares Core MSCI EAFE ETF. For long-term investors who are willing to accept these risks in exchange for broader diversification and potential upside, the Vanguard Total International Stock ETF may be the better choice.
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