The overwhelming majority of my non-retirement net worth is in my brokerage account invested in the index exchange-traded funds (ETFs) Vanguard Total Stock Market ETF (VTI, 0.03% expense ratio, represents the United States’ total stock market) and Vanguard Total International Stock ETF (VXUS, 0.07% expense ratio, represents the international market). Some would argue just investing in Vanguard Total World Stock ETF (VT, 0.07% expense ratio), but I rather be able to rebalance my domestic (VTI) to international (VXUS) investment ratio as I wish. Also, since the majority of my investments are in VTI, the 0.03% expense ratio ends up being lower than just investing in VT.
So what are the benefits of this strategy?
First and foremost – global diversification. Through these two ETFs, I’m able to gain exposure to a wide range of companies and industries worldwide. Diversification across regions helps reduce the risk associated with putting all investments in a single country’s market, enhancing portfolio stability when one market is underperforming but another is thriving.
VXUS allows me to take advantage of currency diversification and exposure to emerging markets. Because this fund includes companies listed on international stock exchanges denominated in various currencies, I can diversify my exposure to different currencies and better manage risks in times of currency fluctuations or geopolitical events. VXUS also includes stocks from emerging markets which have the potential for higher growth rates than developed markets. I want to capitalize on these strong performances and further enhance my overall portfolio’s returns.
As my brokerage portfolio grows with time, weekly contributions, and reinvestment of dividends into existing securities, I’m growing my net worth. 🙂