Is Spring 2026 the Best Time to Buy VXUS for Global Diversification?
Many American investors allocated most of their portfolios to U.S. stocks because they’re more familiar with those companies or expect them to outperform their overseas counterparts. However, the S&P 500 looks historically expensive at 28 times earnings, and a growing list of geopolitical conflicts and macroeconomic headwinds could compress that multiple this year.
Therefore, it might be the ideal time to increase your exposure to overseas stocks through the Vanguard Total International Stock ETF (NASDAQ: VXUS), the world’s largest global ETF (excluding U.S. stocks) with $636.7 billion in total assets as of the end of February. Let’s see why it’s one of the easiest ways to diversify your portfolio from the frothy U.S. market.
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VXUS tracks the FTSE Global All Cap (excluding U.S.) index. It holds 8,703 stocks with a median market capitalization of $52.0 billion and an average earnings growth rate of 15.9%. It trades at just 18 times earnings, making it much cheaper than the S&P 500.
Since it’s passively managed and simply follows the index, it only charges a low expense ratio of 0.05%. By comparison, actively managed equity ETFs have an average expense ratio of 0.14%.
VXUS allocates roughly 26% of its portfolio to emerging markets, 37% to Europe, 28% to the Pacific region, 8% to North America, and 1% to the Middle East. It has very little direct exposure to the Iran War, but a lot of its portfolio companies are still indirectly exposed to the conflict.
VXUS’s top holdings include TSMC (3.4% of the fund), Samsung Electronics (1.6%), ASML (1.3%), and Tencent (0.9%). Unlike U.S. retail investors, who can usually access only some of these companies through U.S.-listed ADRs or over-the-counter (OTC) shares, the fund directly purchases their overseas shares.
Over the past five years, VXUS delivered a total return of 42%. The Vanguard S&P 500 ETF (NYSEMKT: VOO), which tracks the S&P 500, delivered a total return of 74%. However, past performance never guarantees future gains — and VXUS could outperform VOO over the next five years as investors revalue U.S. and international stocks.
According to the base case of Vanguard’s Capital Markets Model (VCMM), overseas (excluding U.S.) stocks could outperform their U.S. counterparts by 2.2% annually from 2023 to 2033. Therefore, if you’re worried about U.S. stocks collapsing under the weight of their valuations this year or simply want to increase your overseas exposure, VXUS checks all the right boxes.
