If you’re staring at your brokerage account wondering why your portfolio feels like a lopsided house, you’re not alone. Most American investors are suffering from a massive case of "home bias." We buy what we know. We buy Apple, Nvidia, and Amazon. But honestly? Ignoring the other 40% of the global investable market is a gamble that's starting to look a lot riskier than it used to. That’s where the Vanguard FTSE All-World ex-US ETF, known by its ticker VEU, comes into play.
It’s a massive fund. It holds thousands of companies. It’s basically a one-click way to own almost everything on the planet that isn't headquartered in the United States.
But here is the thing: most people treat international stocks like a boring side dish. They shouldn't. With the S&P 500 trading at valuations that make some analysts sweat, looking across the pond—and across the Pacific—isn't just a "good idea" anymore. It’s arguably a necessity for anyone who doesn't want their entire retirement tied to the fate of a dozen Silicon Valley tech giants.
What is VEU, really?
At its core, the Vanguard FTSE All-World ex-US ETF is a market-cap-weighted index fund. It tracks the FTSE All-World ex US Index. This means it holds large- and mid-cap stocks from 46 different countries. You’re getting exposure to developed markets like Japan, France, and the UK, but you’re also getting a healthy slice of emerging markets like China, India, and Brazil.
Vanguard launched this thing back in 2007. Since then, it’s become a cornerstone for DIY investors and institutional pros alike. The expense ratio is a rock-bottom 0.07%. That’s $7 a year for every $10,000 you invest. Compare that to the 1% or higher fees you'll find in older mutual funds, and you realize why Vanguard has basically won the "price war" of the last two decades.
The fund is deep. We’re talking over 3,800 holdings. When you buy a share of VEU, you’re buying a tiny piece of Taiwan Semiconductor (TSMC), Novo Nordisk, Nestlé, and ASML. These aren't "foreign experiments." These are global titans that dominate their respective industries.
The Valuation Gap Nobody Wants to Talk About
Look, the US has been on a tear. For the last 15 years, betting against the US has been a losing game. But markets move in cycles. Always have. Always will.
Right now, US stocks are expensive. By almost any metric—Price-to-Earnings (P/E), Price-to-Book, or the Shiller PE ratio—the US market is trading at a premium. Meanwhile, the companies inside the Vanguard FTSE All-World ex-US ETF are often trading at a significant discount.
You’re essentially buying similar earnings for a lower price.
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Take a company like ASML in the Netherlands. They make the machines that make the chips that power the AI revolution. You can’t have Nvidia without ASML. Yet, because ASML is European, it often flies under the radar of the average US retail investor. Or look at Novo Nordisk in Denmark. They’ve fundamentally changed the healthcare landscape with Ozempic and Wegovy. VEU gives you a front-row seat to that growth without the "US-only" price tag.
Sector Differences Are Key
When you buy the S&P 500, you are heavily tilted toward Technology. It's almost 30% of the index at this point.
The Vanguard FTSE All-World ex-US ETF looks different.
It’s more balanced.
Financials take a bigger seat at the table.
Industrials are more prominent.
Consumer Staples matter more.
If tech takes a breather—which, let's be real, it eventually has to—the international markets provide a buffer. This isn't about finding the "next big thing" as much as it is about not having all your eggs in a single, high-priced basket.
Why Emerging Markets Change the Math
About 25% of VEU is allocated to emerging markets. This is the "spicier" part of the fund.
While developed markets like Switzerland or Japan offer stability and dividends, emerging markets offer raw growth potential. You have a burgeoning middle class in India and a massive, albeit volatile, manufacturing base in China.
There are risks, obviously.
Geopolitics.
Currency fluctuations.
Regulatory changes that happen overnight.
But if you exclude these regions, you’re missing out on the demographic shift of the 21st century. The Vanguard FTSE All-World ex-US ETF manages this by weighting them according to their market size. You aren't "betting" on China; you're simply owning it in proportion to its actual value in the global marketplace.
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The Currency Factor: A Double-Edged Sword
When you invest in VEU, you aren't just betting on companies. You’re betting against the US Dollar—sorta.
Because the fund holds assets in Euros, Yen, and Pounds, the value of your investment is affected by exchange rates. If the US Dollar weakens, your international holdings actually become more valuable when converted back to dollars. If the dollar stays "king" and continues to strengthen, it creates a drag on your returns.
For the last decade, a strong dollar has been a massive headwind for international stocks. But many economists, including those at Vanguard's own Investment Strategy Group, suggest that the dollar may be overvalued. If the pendulum swings back, VEU holders could see a "currency kicker" that boosts their returns significantly compared to US-only investors.
Comparing VEU to VXUS: Which One Wins?
If you’ve done any research into international ETFs, you’ve probably seen VXUS (Vanguard Total International Stock ETF).
They’re cousins.
They’re almost identical.
The main difference is that VXUS includes "small-cap" international stocks, while VEU focuses on large and mid-caps. VXUS has about 8,000 holdings compared to VEU's 3,800.
Does it matter? Honestly, not really.
Their performance charts look like twins. Over long periods, the correlation is nearly 0.99. Some people prefer VEU because they find small-cap international stocks to be too volatile or expensive to trade. Others want the "total" exposure of VXUS. If you already own one, there is almost zero reason to switch to the other. They both accomplish the same goal: getting your money out of the US bubble.
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The Reality of Dividends
One thing investors love about the Vanguard FTSE All-World ex-US ETF is the yield.
International companies, particularly in Europe and Australia, often have a much stronger "dividend culture" than US tech firms. Instead of hoarding cash or doing massive share buybacks, they pay it out. VEU often sports a dividend yield that is 1% to 2% higher than the S&P 500.
For income-focused investors, this is huge.
It’s "real" money hitting your account.
It provides a floor during flat markets.
Just keep in mind the tax implications. Foreign dividends can sometimes be subject to foreign tax withholding, though you can often claim a Foreign Tax Credit on your US tax return to offset this. It’s a bit of paperwork, but for the extra yield, most find it worth the effort.
Misconceptions About Risk
"International is too risky."
I hear this all the time.
But we need to define risk. Is it volatility? Is it the chance of losing money?
If you only own US stocks, your risk is "concentration." You are betting that one country, under one regulatory system, using one currency, will continue to outperform the other 194 countries forever. That is a risk.
Diversification is the only "free lunch" in investing. By adding the Vanguard FTSE All-World ex-US ETF, you are reducing your reliance on the US economy. If the US enters a period of stagflation or political instability, having assets in Tokyo, London, and Seoul acts as a hedge. It might feel "riskier" to buy stocks in countries you can't point to on a map, but from a mathematical standpoint, a global portfolio is actually more robust.
Actionable Steps for Your Portfolio
If you're ready to stop ignoring the rest of the world, don't just jump in blindly. Start with a target allocation. Most experts, including the folks at Vanguard and BlackRock, suggest that an international allocation of 20% to 40% is the "sweet spot" for most portfolios.
- Check your current exposure. Open your brokerage app. Look at your "Total Stock Market" or S&P 500 funds. If that’s all you have, your international exposure is 0%.
- Consider a slow entry. You don't have to move 40% of your net worth today. Use dollar-cost averaging. Set up a recurring buy for VEU over the next 12 months.
- Use the right account. Because of the Foreign Tax Credit mentioned earlier, VEU is often best held in a taxable brokerage account rather than an IRA or 401(k), though the difference isn't a deal-breaker for most.
- Rebalance annually. If the US market has another monster year and your VEU position shrinks as a percentage of your pie, sell some of the US winners and buy more VEU. This forces you to "buy low and sell high" automatically.
The Vanguard FTSE All-World ex-US ETF isn't flashy. It won't give you 100% returns in a week like an AI penny stock. But it's a foundational tool for building wealth that lasts. It’s about admitting that the future is big, global, and unpredictable—and making sure you own a piece of it, no matter where the growth happens.