If you’re looking to invest in ETFs, you may have come across VEA vs VT.
Both of these ETFs offer exposure to international equities, but they have some key differences that investors should be aware of before making a decision.
In this article, we’ll compare VEA vs VT, explaining the similarities and differences between these two ETFs to help you make an informed investment decision.
VEA, or the Vanguard FTSE Developed Markets ETF, tracks the performance of the FTSE Developed All Cap ex US Index. This index includes large-, mid-, and small-cap stocks from developed markets around the world, excluding the United States. VT, or the Vanguard Total World Stock ETF, tracks the performance of the FTSE Global All Cap Index, which includes stocks from both developed and emerging markets around the world. As you can see, VT offers broader exposure to international equities than VEA.
When comparing VEA vs VT, it’s important to consider performance metrics, investment strategies, cost analysis, and fund management and structure. We’ll explore each of these factors in more detail below. By the end of this article, you should have a better understanding of which ETF is right for your investment goals.
Key Takeaways VEA vs VT
- VEA and VT are both ETFs that offer exposure to international equities, but VT offers broader exposure to both developed and emerging markets.
- When comparing VEA vs VT, it’s important to consider performance metrics, investment strategies, cost analysis, and fund management and structure.
- Ultimately, the choice between VEA and VT will depend on your investment goals and risk tolerance.
Understanding VEA vs VT
When it comes to investing in global equities, Vanguard offers two popular options: VEA and VT. In this section, we will take a closer look at both funds and compare their objectives, asset classes, and holdings.
Fund Objectives
VEA, or the Vanguard FTSE Developed Markets ETF, seeks to track the performance of the FTSE Developed All Cap ex US Index, which includes large-, mid-, and small-cap stocks from developed markets outside the United States. The fund aims to provide investors with exposure to a broad range of international equities, including companies in Europe, Asia, and Australia.
VT, or the Vanguard Total World Stock ETF, seeks to track the performance of the FTSE Global All Cap Index, which includes large-, mid-, and small-cap stocks from both developed and emerging markets around the world. The fund aims to provide investors with exposure to a comprehensive range of global equities, including companies in the United States, Europe, Asia, and emerging markets.
Asset Classes and Holdings
VEA and VT have different asset class and holdings compositions. VEA is primarily invested in equities, with a small allocation to real estate, while VT is almost entirely invested in equities. Both funds have similar sector weightings, with the largest allocations to financials, industrials, and healthcare.
VEA holds over 3,500 stocks, with the largest holdings including Nestle, Roche, and Samsung. The fund has a low expense ratio of 0.05% and is available as an ETF or mutual fund.
VT holds over 8,000 stocks, with the largest holdings including Apple, Microsoft, and Amazon. The fund has a slightly higher expense ratio of 0.08% and is also available as an ETF or mutual fund.
Overall, both VEA and VT offer investors exposure to a broad range of international equities. VEA is a good option for investors looking for exposure to developed markets outside the United States, while VT is a good option for investors looking for exposure to both developed and emerging markets around the world.
Performance Metrics VEA vs VT
Historical Returns
When comparing VEA and VT in terms of historical returns, it is important to consider both short-term and long-term performance. Over the past year, VEA has returned 20.2%, while VT has returned 22.1%. However, over the past five years, VEA has returned 9.2%, while VT has returned 11.1%.
It is worth noting that both VEA and VT have provided strong returns over the past decade, with average annual returns of 8.1% and 10.4%, respectively. However, it is important to keep in mind that past performance is not necessarily indicative of future results.
Risk and Volatility
When considering the risk and volatility of VEA and VT, it is important to look at metrics such as standard deviation, beta, and Sharpe ratio. VEA has a standard deviation of 14.2%, while VT has a standard deviation of 14.6%. This indicates that VT is slightly more volatile than VEA.
In terms of beta, VEA has a beta of 0.98, while VT has a beta of 1.00. This means that VT is slightly more correlated to the broader market than VEA.
When looking at the Sharpe ratio, which measures risk-adjusted returns, VEA has a Sharpe ratio of 0.70, while VT has a Sharpe ratio of 0.77. This indicates that VT has provided slightly better risk-adjusted returns than VEA.
Overall, both VEA and VT have provided strong historical returns, but VT has been slightly more volatile and has provided slightly better risk-adjusted returns.
Investment Strategies
When considering an investment in VEA or VT, it is important to develop a sound investment strategy. An investment strategy will help you to make informed decisions about your portfolio and increase your chances of achieving your financial goals. There are several key factors to consider when developing an investment strategy for VEA vs VT.
Diversification Benefits
One of the primary benefits of investing in VEA or VT is diversification. Both funds provide exposure to a broad range of developed and emerging markets, which can help to reduce risk in your portfolio. When investing in VEA or VT, it is important to consider your overall portfolio and ensure that you have a well-diversified portfolio that includes exposure to a range of asset classes.
Portfolio Growth Considerations
Another important factor to consider when developing an investment strategy for VEA vs VT is portfolio growth. Both funds have historically provided strong returns, but it is important to consider the potential for future growth when making investment decisions. When investing in VEA or VT, you should consider your investment time horizon and risk tolerance, as well as your overall financial goals.
Overall, investing in VEA or VT can be a sound investment strategy for those looking to gain exposure to a broad range of developed and emerging markets. However, it is important to consider your overall investment strategy and ensure that you have a well-diversified portfolio that aligns with your financial goals. By taking a thoughtful and strategic approach to investing, you can increase your chances of achieving long-term financial success.
Cost Analysis
Expense Ratios
When comparing VEA and VT, one of the most important factors to consider is their expense ratios. The expense ratio is the annual fee that the ETF charges to cover its operating expenses. VEA has an expense ratio of 0.05%, while VT has an expense ratio of 0.10%. This means that VEA is cheaper to own than VT.
The expense ratio is an important consideration because it can significantly impact your returns over the long term. Even a small difference in expense ratios can add up to a significant amount of money over time. Therefore, it is important to choose an ETF with a low expense ratio.
Broker Fees
In addition to the expense ratio, you should also consider the broker fees associated with buying and selling VEA and VT. Broker fees can vary significantly from one broker to another, so it is important to shop around to find the best deal.
When buying an ETF, you typically pay a commission to your broker. Some brokers charge a flat fee per trade, while others charge a percentage of the trade value. If you plan to buy and hold VEA or VT for a long time, it may be worth paying a higher commission to get a better price on the ETF.
However, if you plan to trade VEA or VT frequently, you should look for a broker that offers low commission rates. This will help you minimize your trading costs and maximize your returns.
Overall, VEA is cheaper to own than VT, both in terms of its expense ratio and broker fees. However, you should also consider other factors, such as the ETF’s performance and holdings, before making a decision.
Fund Management and Structure
Issuer Information
Both VEA and VT are issued by Vanguard, a well-known investment management company that offers a variety of mutual funds and ETFs. Vanguard is known for its low-cost, passive investment strategies, which aim to track various market indexes. The company was founded in 1975 and has grown to become one of the largest investment management firms in the world.
Assets Under Management (AUM)
VEA and VT have different assets under management (AUM). As of the end of November 2023, VEA has approximately $110 billion in AUM, while VT has approximately $36 billion in AUM. This means that VEA is a larger fund than VT in terms of assets.
Both VEA and VT track the FTSE Developed ex US All Cap Net Tax (US RIC) Index, which is a market-cap-weighted index that measures the performance of large-, mid-, and small-cap stocks of companies located in developed countries outside of the United States. The index is designed to provide investors with broad exposure to non-U.S. equity markets.
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