VEU Vs. VXUS: Which Of These Vanguard ETFs Is Best For Those Looking To Diversify?

Forbes

17-04-2025

Both VEU and VXUS are excellent international ETFs with unique benefits depending on your investment ... More priorities and existing portfolio composition.
Investor concerns over the breakout of a global tariff war have eased after the White House announced a 90-day pause on new duties and negotiations with over 75 countries on trade deals. If successful, these negotiations could prevent trade reduction, supply-chain disruptions, and a rise in consumer prices. These negotiations underscore why international diversification is essential to reduce reliance on a single market.
For investors seeking to diversify their portfolios with an international ETF, VEU and VXUS, both offered by Vanguard, are top contenders. These funds both offer international exposure, void of U.S. holdings, but they differ in their strategy, national exposure and number of holdings. By understanding the key differences between these funds and in which situations either would be preferable, investors can choose the right fund for their portfolio.
In this guide, you'll learn how VEU and VXUS differ by market exposure, expense ratio, holdings and more, as well as how to make the final determination of which fund is right for you.
VEU and VXUS are both ETFs made up of international stock holdings from Vanguard, the firm known for revolutionizing low-cost investing with Vanguard index funds, intended to offer investors exposure to non-U.S. stocks. Both funds can be used to diversify your portfolio with international stocks, each with unique strategies to accomplish this goal.
VEU tracks the FTSE All-World ex-US Index which provides broad exposure to developed and emerging markets outside of the United States. VEU has over 3,000 holdings from Europe, Asia and Latin America providing significant exposure to international markets. VEU makes it easy to gain international exposure while avoiding overlap with U.S. stocks, including the best stocks for 2025.
This ETF is ideal for investors seeking broad diversification in international markets with a focus on large and mid-cap stocks. VEU is more focused on developed markets than emerging markets and its large positions include Taiwan Semiconductor, Tencent, SAP, Alibaba, and Novo Nordisk. VEU has a low expense ratio of just 0.04% and net assets of $59.54B.
VXUS tracks the FTSE Global All Cap ex-US Index which includes small, mid and large-cap stocks from across the world with the exception of the United States. This ETF provides broader exposure to international stocks than VEU with more exposure to small-cap stocks and emerging markets than VEU. With holdings of over 7,000 stocks, VXUS is ideal for investors seeking more granular market exposure.
VXUS' primary holdings overlap with VEU including Taiwan Semiconductor, Tencent, SAP, Alibaba, and Novo Nordisk but with slightly lower percentage holdings in these than VEU as it has more total holdings. Like VEU, VXUS' primary sector holdings include Financial Service, Industrials, Technology, Consumer Cyclical and Healthcare. VXUS has higher net assets than VEU of $455.42B and a slightly higher expense ratio of 0.05%
VEU and VXUS both provide international exposure but they differ in their strategies and holdings. VEU's holdings are concentrated in mid and large-cap stocks in developed and emerging markets. This ETF excludes U.S. stocks and also has fewer holdings.
VXUS provides more broad exposure with small-cap holdings in addition to mid and large-cap stocks. This fund composition provides more diversification to investors and is ideal for investors seeking more complete international exposure. While its inclusion of small-cap stocks can increase volatility, it also can offer greater potential for growth.
Datawrapper link: https://datawrapper.dwcdn.net/Jmn1O/1/
VEU has holdings of over 3,000 stocks from more than 45 countries with the exception of the U.S. This fund has more concentrated holdings in developed markets with heavy weightings in Europe and Asia. While it does provide emerging market exposure, it provides less than VXUS.
VXUS has holdings of over 7,000 stocks with broader exposure across emerging markets than VEU with more diversity in market capitalizations of its holdings. These attributes make VXUS more ideal for investors seeking full international exposure.
In light of recent tariff news, VEU's limited allocation to small cap stocks, many in emerging markets, may serve as a risk if trade deals aren't reached with specific trading partners like the EU for example. VXUS' broader inclusion of small caps and emerging market holdings may reduce the effect of any one region's tariffs.
VEU and VXUS both boast low expense ratios with VEU charging just a 0.04% expense ratio and VXUS charging 0.05%. While both funds are cost-effective, VEU's marginally lower cost may appeal to more investors seeking to minimize fees. For investors seeking broader diversification, VXUS' higher fee may be worthwhile.
VEU maintains lower trading volume than VXUS which may result in wider bid-ask spreads. Long-term investors won't be as affected by this difference but it is relevant for traders who need higher liquidity from their ETFs. VXUS offers greater liquidity and higher trading volume than VEU, making it also more ideal for institutional investors.
Both VEU and VXUS offer attractive dividend yields with VXUS edging out VEU with a 3.15% yield versus 3.03%. For investors seeking more income from funds in their portfolio, VXUS may be preferable. Dividend yields can change year to year due to payouts from holdings.
VEU and VXUS have had similar performance over the last 10 years due to similar holdings and primary exposure to the same markets. Despite this common trend, VEU has outperformed VXUS in both the short and longer term. VEU's 1-year return is 7.02% while VXUS' 1-year return is 6.62%.
Likewise, VEU's 3-year return is 5.00% while VXUS returned 4.58%. In comparison, VOO, Vanguard's S&P 500 ETF had a 1-year return of 6.93% and a 3-year return of 8.81%. Despite VOO's outperformance in the 3-year return, VEU and VXUS can offer valuable diversification for domestic-heavy portfolios.
For more information on two of the primary U.S. ETFs offered by Vanguard to consider, read this helpful guide: VTI vs VOO.
Investors should choose VEU or VXUS based on their investing objectives, portfolio composition and risk tolerance. If you want a fund with a history of higher performance and more concentration in developed markets, VEU would be a better fit. If you prefer broader international exposure and more diversification in cap size, VXUS is a better fit.
You want a fund with more focus in large and mid-cap stocks but without U.S. exposure. VEU is also a better fit if you wish to invest in larger, established international stocks with a lower expense ratio and a better history of performance. VEU could also be the right fund for you if you wish for lower volatility in the portfolio and less portfolio churn due to less exposure to small-cap stocks and stocks from developing nations.
You want broader international market exposure with more small-cap and emerging market stocks. For investors seeking more total-market exposure with a higher dividend yield, VXUS is an ideal fit. If you're also seeking more liquidity in your fund and slightly tighter bid-ask spreads, choose VXUS.
VXUS may also be a better fit for investors who want more diversification in their international fund, have a longer time horizon, and can tolerate more volatility for potentially higher long-term gains.
Bottom Line
Both VEU and VXUS are excellent international ETFs with unique benefits depending on your investment priorities and existing portfolio composition. VXUS is a superior fit for investors seeking broad market exposure and higher yield. VEU is a better fit for investors who are conscious of fees, want to invest primarily in international blue-chip stocks, and prefer a history of higher performance. Ultimately, both ETFs provide strong international exposure so your selection will be determined by how much you weigh the marginal differences in these ETF's features.
Yes, VXUS includes holdings from emerging markets including China, Brazil and India.
VXUS offers slightly better long-term growth potential due to small-cap and emerging market stocks being included in its index.
Both VEU and VXUS are tax efficient, as ETFs are more tax efficient than index funds. Both ETFs are subject to foreign tax withholding if you're a U.S. investor.
It would be unnecessary to hold both VEU and VXUS as these ETFs have significant overlap in their holdings and purpose so it would be more efficient to hold just one.