Categories: Exchange Traded Funds (ETFs)International Investing

How Vanguard Takes on Developed Markets

Hanumann, CC-By-2.0

This write-up is the next installment in our series about low-expense-ratio exchange-traded fund (ETF) provider Vanguard and features the Vanguard FTSE Developed Markets Fund (VEA). VEA is Vanguard’s third-largest ETF by assets under management at $44.46 billion, and its 0.09% expense ratio is less than a quarter of the average ratio for similarly allocated funds.

This ETF seeks to match the performance of an index that measures the investment return of stocks in the major markets of Europe and the Pacific region. VEA holds each stock in approximately the same proportion as its weighting in the index.

VEA has fallen 8.11% this year, though it was slightly ahead before a precipitous tumble in the developed markets during the last month and a half, as seen in the chart below. The recent lows potentially could provide an enticing entry point for prospective investors. This fund also offers a dividend yield of 3.44%.

VEA has holdings in most major sectors, with its largest allocations to financial services, 21.51%; industrials, 11.91%; and consumer cyclical, 11.39%. This fund’s top 10 holdings make up 11.88% of its total assets, with this list including many significant and perhaps familiar foreign companies, such as Nestle (NSRGF), 1.66%; Novartis AG (NVSEF), 1.56%; Roche Holding AG (RHHVF), 1.47%; HSBC Holdings PLC (HBCYF), 1.38%; and Toyota Motor Corporation (TOYOF), 1.11%.

While investing in emerging markets has been in vogue of late, developed markets in Europe and Asia have been lagging. If you think developed markets are bottoming and due for rebound, a fund with industry-beating low expense ratios such as Vanguard FTSE Developed Markets Fund (VEA) may be worth a look.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about a bargain market-spanning ETF. I also invite you to comment in the space provided below.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/