VXUS is an easy way to gain exposure to overseas markets.
The S&P 500 has gotten off to a shaky start this year, but it’s still up 75% over the past five years and looks historically expensive at 30 times earnings. Moreover, most of that rally was driven by a handful of mega-cap tech stocks, such as Nvidia, Microsoft, and Apple, rather than a broader range of stocks.
So if you think U.S. stocks are getting overvalued at these levels, it probably isn’t the best time to invest in the popular Vanguard S&P 500 ETF (VOO 1.55%). However, it might be the perfect time to invest in the Vanguard Total International Stock ETF (VXUS 1.04%), which offers broad exposure to overseas markets.
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Why is it the right time to buy VXUS?
VXUS holds a basket of 8,646 stocks and passively tracks the FTSE Global All Cap ex US Index, with a low expense ratio of 0.05%. It allocates 26.8% of its portfolio to emerging markets, 38.2% to Europe, 25.6% to Asia-Pacific, 8.1% to North America, and the rest to other regions. The only three stocks that account for more than 1% of its portfolio are TSMC, Tencent, and ASML.
VXUS has already rallied 9% year-to-date, while the S&P 500 has stayed flat. It could continue rising as more investors diversify their portfolios away from the overheated U.S. market.
Leo Sun has positions in ASML and Apple. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Tencent, Vanguard S&P 500 ETF, and Vanguard Total International Stock ETF. The Motley Fool has a disclosure policy.
