Exploring Vanguard's Global Stock Fund: A Smart Choice?

Vanguard's FTSE Developed Markets ETF, or VEA, is a popular pick for investors looking to dip their toes into international stocks. It's like a big basket filled with nearly all the stocks from developed countries outside the U. S. The fund is known for its low fees and wide range of holdings, making it an attractive option for many. VEA tracks the FTSE Developed All Cap ex US Index, which includes small, mid, and large companies from developed markets around the world. This index is made up of around 4, 000 stocks. The fund weights its holdings based on market capitalization, meaning bigger companies have a larger share in the portfolio. This approach lets the market decide the value of each stock, with successful companies growing their share over time. One of the standout features of VEA is its diversification. It includes stocks from countries like Canada and South Korea, which many other funds overlook. With nearly 4, 000 stocks in its portfolio, no single stock makes up more than 2% of the fund. This spread helps reduce risk and smooths out returns.However, VEA doesn't include stocks from emerging markets. While this might limit its growth potential if emerging markets perform well, it has actually helped the fund outperform competitors in recent years. The fund's index returned about 10. 3% annually over the past five years, which is on par with other developed-market indexes but better than those that included underperforming emerging-market stocks. Looking at the past decade, the index gained around 7. 8% annually. This performance is similar to other major foreign stock indexes. The fund's focus on developed markets drives most of the differences in risk and return compared to broader benchmarks. Over the long term, these differences tend to even out. VEA doesn't hedge against currency risk, which has hurt its performance recently as the U. S. dollar has been strong. However, the impact of currency fluctuations on total return tends to balance out over time.