Vanguard total world ex US (ASX:VEU) ETF review

Review of Vanguard Total world ex US (ASX:VEU) ETF from a long term index fund investor on the path to Financial Independence.

Vanguards VEU is a diversified index fund listed on the Australian Securities Exchange which provided global exposure (ex US) and tracks the FTSE All-world ex US index. VEU is a highly diversified fund, comprising 3597 stocks with a market capital of (USD) $2.32 Billion for the Australian listed ETF, and a market capital of $71.4 Billion for the total fund class size as of March 2022. It provides exposure to many of the worlds largest listed companies as well as emerging markets by investing a diversified range of shares, industries and economies.

The Good

  • Easy way to get global diversification
  • Low Management Expense Ratio

The Bad

  • Extra volatility due to currency conversion risk
  • Does contain Australian shares (can be a small double up with something like VAS or A200)
  • Emerging markets known as being higher risk

Verdict: VEU is a diversified ETF that holds globally diversified shares in over 3500 companies minus anything from the United States of America. Its top economic exposures account for two thirds of the portfolio and are Japan (16%) through to United Kingdom, China, France, Switzerland, Canada, Germany and Australia (4.7%) , with the remaining third being from all other nations. The Management Expense Ratio is 0.08%

CaptainFI is not a Financial Advisor and the information below is not financial advice. This website is reader-supported, which means we may be paid when you visit links to partner or featured sites, or by advertising on the site. For more information please read my Privacy PolicyTerms of Use, and Financial Disclaimer.

Vanguard, VEU, CaptainFI, Captain FI, FI
VEU portfolio breakdown at a Glance (Vanguard, 2019)

The Details

VEU is a highly diversified fund, comprising 3597 stocks with a market capital of (USD) $2.32 Billion for the Australian listed ETF, and a market capital of $71.4 Billion for the total fund class size as of March 2022.

The ETF provides exposure to many of the world’s largest companies listed in major developed and emerging countries outside the US. It offers low-cost access to a broadly diversified range of securities, industries and economies. The ETF is exposed to the fluctuating values of foreign currencies, as there will not be any hedging of foreign currencies to the Australian dollar.

Vanguard

Top 10

Its top ten holdings (below) account for only 10.6% of the total fund, demonstrating its diversification.

VEU top ten holdings (Vanguard, 2022)

Management fee of VEU

The Management Expense Ratio for VEU is also quite low, at a respectable .08% MER. This means it costs just $8 per $10,000 invested per year with Vanguard in the VEU fund. Vanguard had recently reduced this cost from .11%, showing their commitment to rock bottom ETF funds. The Vanguard company itself is unique in the industry as it’s owned by shareholders and therefore motivated to provide the best service at the lowest price (unlike some investment firms).

Sectors

VEU has a higher weighting of almost a quarter of its holdings in the financials sectors (think banks, insurance etc), followed by Consumer Goods (such as Food producers, Shops and Clothing). Industrial, Health care, Consumer services and Technology and Oil and Gas make the next five biggest sectors, with the final three of its top ten being Basic Materials, Telcos and Utilities companies.

Vanguard, VEU, CaptainFI, Captain FI, FI
VEU top 10 industry / sector exposure (Vanguard, 2019)

Economic exposures

The US economic powerhouse is deliberately excluded from this stock market index ETF. This leaves Japan, the UK, China, France, Switzerland, Canada, Germany and Australia to comprise its top eight economic exposures – this represents two thirds (66%) of the total fund as shown below.

Vanguard, VEU, CaptainFI, Captain FI, FI
VEU top 20 global economic exposure (source Vanguard, 2019)

Performance

VEU has provided investors with good total returns over the long term. Capital growth has been steady but volatile, as seen below. In addition to capital growth, VEU has on average paid a 3.28% dividend – however being global shares, this has no franking credit attached to it. This is a pretty solid dividend return, which means to follow the 4% draw down rule in the retirement phase you wouldn’t need to sell many parcels of shares at all (not that selling share parcels is an issue, the capital growth of remaining shares will cover this if it’s done sustainably).

Vanguard, VEU, CaptainFI, Captain FI, FI
VEU growth (source Google)
Vanguard, VEU, CaptainFI, Captain FI, FI
VEU performance against benchmark FTSE all world ex-US index.

Why I own VEU

I bought VEU in an effort to diversify away from the ‘Home Bias’ of Australian stocks, and hedge my bet against US stocks. Although I love the juicy franked dividends of Aussie stocks, I am exploring other markets to protect myself from changes within Australia; economic or legislative. Although VEU does have about 5% Australian exposure, I am not too worried as its a small double up.

Having an internationally diversified portfolio is a way to manage or spread out your risk across multiple countries or economies. It is important to realise that whilst you do get some diversification and risk mitigation by spreading out your shares globally, there is still correlation risk within shares as a wider asset class. For example if global interest rates change, or there is a global pandemic, then it is likely shares in general will be affected – like what we saw during COVID-19.

Some people might opt for other ways to get global diversify their portfolios, including exploring the following popular options;

I personally chose the three fund split, and have an ETF portfolio using target of 25% A200, 50% VTS and 25% VEU

Summary

Vanguards VEU is a diversified index fund listed on the Australian Securities Exchange which provided global exposure (ex US) and tracks the FTSE All-world ex US index. VEU is a highly diversified fund, comprising 3597 stocks with a market capital of (USD) $2.32 Billion for the Australian listed ETF, and a market capital of $71.4 Billion for the total fund class size as of March 2022. It provides exposure to many of the worlds largest listed companies as well as emerging markets by investing a diversified range of shares, industries and economies.

Financial Disclaimer

Financial Disclaimer: CaptainFI is NOT a financial advisor and does not hold an AFSL. This is not financial Advice!

I am not a financial adviser and I do not hold an Australian Financial Services Licence (AFSL). In this article, I am giving you factual, balanced information without judgment or bias, to the best of my ability. I am not giving you any general or personal financial advice about what you should do with your investments. Just because I do something with my money (or use a particular service or platform) doesn’t mean it is automatically appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product, and my usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence.

I can only provide factual information based on my journey to Financial Independence, and that is provided for general informational and entertainment purposes only. I make no guarantee about the performance of any product, and although I strive to keep the information accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted.

Remember – you always need to do your own independent research and due diligence before making any transaction. This includes reading and analysing Product Disclosure Statements, Terms and Conditions, Service Arrangement and Fee Structures. It is always smart to compare products and discuss them, but ultimately you need to take responsibility for your use of any particular product and make sure it suits your personal circumstances. If you need help and would like to obtain personal financial advice about which investment options or platforms may be right for you, please talk to a licensed financial adviser or AFSL holder – you can take the first steps to find a financial advisor by reading this interview, or by visiting the ASIC financial adviser register and searching in your area.

For more information please read my Privacy PolicyTerms of Use, and Financial Disclaimer.

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