Introduction
Many investors have questioned the value of holding international stocks due to their underperformance compared to US stocks and the added risk of currency fluctuations. This article examines two ETFs that offer international exposure: iShares MSCI ACWI ex U.S. ETF (ACWX) and Vanguard Total International Stock Index Fund ETF (VXUS). While VXUS has historically performed slightly better, this article explains the potential advantages of ACWX for maximizing returns based on its more concentrated portfolio.
iShares MSCI ACWI ex U.S. ETF (ACWX)
This ETF tracks the MSCI ACWI ex USA Index, which includes large- and mid-capitalization non-US equities. ACWX has $4.5b in assets under management (AUM) and provides a yield of 2.9%. Its fee is 34bps.
Vanguard Total International Stock Index Fund ETF (VXUS)
VXUS tracks the FTSE Global All Cap ex US Index, which includes stocks from developed and emerging markets, excluding the US. It has a significantly larger AUM of $425b, a lower fee of 8bps, and a slightly higher yield of 3.4%.
Comparing ACWX and VXUS
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Market-cap and style allocations:
The market-cap and style allocations between ACWX and VXUS are similar, with small differences in allocation to certain sectors and company sizes. However, ACWX has a higher weighted average market cap than VXUS.*
Sector allocations:
Both ETFs have similar sector allocations, with Technology and Financials being the largest sectors. However, ACWX has a slightly higher allocation to Materials and a lower allocation to Industrials.*
Region/country allocations:
The region/country allocations are also comparable, with exposure to developed and emerging markets. ACWX has a slightly higher allocation to Europe Developed while VXUS has a higher allocation to Japan.*
Returns and risk:
Historically, VXUS has outperformed ACWX in terms of returns and risk. However, the differences are not substantial.Why I Own ACWX, Not VXUS
The author prefers ACWX over VXUS due to its more concentrated portfolio. ACWX holds approximately 1849 stocks, while VXUS holds around 8570. The author believes that managing a smaller number of holdings allows for better portfolio maintenance and potentially higher returns.
Conclusion
The choice between ACWX and VXUS depends on individual investment preferences. VXUS offers a more diversified portfolio with historically better returns, while ACWX has the potential for higher returns due to its more concentrated portfolio. Investors should consider their risk tolerance and investment goals when making a decision.
