Posts tagged vwo

An international presence is essential in any portfolio.  While the US economy could be stagnant other parts of the world could be booming.  Just look at 2008-2009.  While the financial crisis sent shockwaves through the world economies – international funds actually outperformed US equities. The ETF I’d like to feature today is VWO – or the Vanguard Emerging Markets ETF Fund.

Except a small window in late 2008, VWO outperformed the S&P 500 by almost double digit percentage gains.

International stocks and indexes are still very risky assets to own, however.  One year you’ll see a 70% gain, the next year you’ll see a 40% drop.  That’s the nature of the beast.  This is why you only want to allocate no more than 10% of your portfolio to an international fund or ETF.  Obviously, I am a bit convserative and you can adjust this up if you have a longer time-frame to retirement.  People in their 20′s could invest up to 15-20% internationally depending on their risk tolerance.

Here is VWO’s profile

The Fund seeks to match the performance of the MSCI Emerging Markets Index. The Fund employs a passive management or indexing investment approach by investing substantially all (normally about 95%) of its assets in the common stocks included in the Index.

You may notice I’ve been recommending a lot of Vanguard ETF’s.  They are by far any away the best in my opinion.  They have absolutely the lowest fees, period.  And fees can add up.

Let’s say you have $100,000 of VWO.  The yearly expense ratio of VWO is .22%.  That’s roughly $220 per year.  Now let’s look at a competitor.  iShares Emerging Market ETF – EEM charges .69% – or almost triple the fee for roughly the same exact fund.  Multiply that times 10 years of investing and that’s some serious cash you’re saving.

Some specifics on VWO:

VWO      S&P

These are crazy returns – don’t expect this every year.  The 5 year obviously includes the 2008 financial disaster.