VXUS Offers Broader Global Exposure Than IEFA

The Vanguard Total International Stock ETF (NASDAQ:VXUS) and iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) differ most in their market coverage: VXUS includes emerging markets, while IEFA limits itself to developed countries outside the U.S. and Canada.

Both funds target investors seeking global diversification beyond the U.S., but VXUS tracks thousands of stocks across both developed and emerging markets, while IEFA focuses exclusively on developed markets, omitting both the U.S. and Canada. This comparison highlights how each ETF stacks up on cost, performance, risk, and portfolio makeup.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months.

IEFA charges a slightly higher expense ratio than VXUS, but the difference is modest. Investors looking for a higher payout may notice IEFA’s yield edges out VXUS by 0.36 percentage points.

VXUS holds 8,691 stocks and adds emerging markets to its developed-market mix. Top positions include Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, and ASML Holding NV. It offers more geographic diversification than IEFA, with 38% in Europe,  27% in emerging markets, 25% in the Pacific, and just 8% in North America.

IEFA, by contrast, offers exposure to 2,589 developed-market stocks. Its largest holdings include ASML Holding NV, Roche Holding AG, and AstraZeneca Plc. The fund has been operating for more than 13 years, offering a long track record and a stable composition for those who want to avoid emerging-market risk.

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These are both low-cost options to gain broad exposure to international stocks. Improving global economic conditions and a weaker dollar could drive growth in international stocks in 2026. IEFA appears to be the better option for the current bull market, as it has slightly outperformed VXUS over the last 1-year period.

IEFA may also be a better choice for several reasons. It offers a higher dividend yield. Plus, it is focused solely on developed markets, where economic stability is greater.

VXUS offers greater diversification, but that’s more to mitigate the inherent risks and volatility of investing in emerging markets. But VXUS has managed this well, as noted by its lower volatility (beta) over the past five years.

Still, IEFA has delivered better returns over the past five years (including dividend reinvestment), which suggests it is a better performer across market cycles. Its higher yield may seal the deal for investors looking for a solid international stock fund.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Total International Stock ETF. The Motley Fool has a disclosure policy.

VXUS Offers Broader Global Exposure Than IEFA was originally published by The Motley Fool