Vanguard: Going All-World

04/25/2017 2:50 am EST

Focus: FUNDS

Mark Salzinger

Editor and Publisher, The No-Load Fund Investor

Most international stock funds, including those of the index variety, devote considerably more to the ‘Old World’ than to emerging markets, explains fund expert Mark Salzinger, editor of The No-Load Fund Investor.

Vanguard FTSE All-World ex US (VFWIX), however, includes exposure to various emerging markets as well as developed foreign markets. 

In total, the fund includes more than 2,500 holdings, with a median market cap of $28.3 billion. Japanese equities account for the largest percentage of assets, at 17.9%, followed by the United Kingdom at 12.9% and then France, Germany and Canada, each between 6% and 6.5%.

Despite the emerging markets exposure (including various countries in Asia, including China and India, as well as a little exposure in Latin America), FTSE All-World ex US has much in common with other broad international equity index funds. 

One reason is the fund’s holdings are weighted by market capitalization, so the largest companies outside the U.S. account for almost as much in this fund as they do in its competitors that avoid emerging markets.

FTSE All-World ex US has no substantial bias in terms of investment style. It includes some growth stocks, some value stocks and some in the middle, resulting in an overall style of ‘blend.’

Because emerging market equities tend to have lower valuations than those of many developed countries, the overall price/earnings ratio (P/E) of the fund is slightly lower than those of most of its index competitors. 

We prefer it to most other broad international equity index funds because the inclusion of emerging market equities simplifies things while offering a little more potential for long-term growth.

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