Morningstar backs Vanguard VXUS on low fee and 8,500-stock index

Morningstar fund analysts argue that Vanguard Total International Stock ETF's low fee and broad holdings make it one of the best international-stock funds available, in an analysis published Oct. 21.

VXUS tracks the FTSE Global All Cap ex US Index: more than 8,500 small-, mid- and large-cap stocks from developed and emerging markets, weighted by market capitalization. Morningstar says the 10 largest positions regularly account for less than 15% of assets and single stocks rarely exceed 2%, with Taiwan Semiconductor Manufacturing the outlier at 4% lately.

Its emerging-markets allocation is usually close to double the roughly one-tenth of assets the average foreign large-blend fund holds. Morningstar says that widens its scope versus peers and may give it an edge, since emerging-market stocks historically have paid for higher volatility with strong rally returns. Emerging-market struggles from 2021 through 2023 hurt relative performance in those years.

Low fees have offset that drag, per Morningstar: VXUS returned 9.4% annualized in the five years through September 2026, 67 basis points a year ahead of its average category peer. Over 10 years it returned 9.2% annualized, 77 basis points ahead of the category norm. Volatility ran slightly higher than the category, but risk-adjusted returns still edged the average. The fund is fully invested and does not hedge currency risk.

The 67 and 77 basis points are return differences, not fee differences. Morningstar attributes much of the category-relative edge to cost, which it calls a durable advantage, while country and regional tilts can swing relative results from period to period. The 4% Taiwan Semiconductor position, in a portfolio where single stocks rarely exceed 2%, is the concentration item to watch. Market-cap weighting will keep sizing it by price.