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@JunioR：$Vanguard Total International Stock Index Fund ETF Shares(VXUS)$is an etf that consists of all the international stocks, similar to VTI or IWDA, but excludes the US stock market. This makes it a suitable etf for those who are looking to diversify their stock holdings globally while also trying to avoid the US stocks. There could be a few reasons for this. First, the investor could be wary of US stock market valuations. At a current P/E ratio of 20, the US stock market is still way higher than the long term average P/E ratio of 15-16. And this is after the near 20% correction of recent weeks. This could imply that the US market could potentially continue to fall, and that the recent surge could just be a dead cat bounce. Another reason could be the relatively cheapvaluations of global stocks excluding US. The current P/E ratio of VXUS is around 12.5, which makes it have a bigger margin of safety as compared to VTI, which consists of 60% of US markets. Value and Growth are two fundamental styles of equity investing. Value stocks represent companies that possess good fundamentals but might be under-priced as valuations may be lesser than historical average or industry peers. Value indices often screen for stocks with Value characteristics using a mix of valuation metrics, such as book value to price, 12-month forward earnings to price, and dividend yield. Value will continue to hold up well given the current economic growth backdrop. Recently, concerns have arisen regarding the growth outlook in 2022 due to the potential impact of the Russia-Ukraine war and the Fed rate hike cycle. While these factors will likely result in a moderation of global growth momentum, especially coming off a robust rebound last year, we expect the global recovery to carry on. We see several catalysts down the road that could support global growth and in turn, remain conducive for Value performance. First, we see room for more fiscal support across major economies. Policymakers are already facing mounting pressure to reverse their fiscal tightening decisions and increase support amidst rising commodity prices. A current account surplus may embolden the decision to do so. Second, and more importantly, we look to the potential re-opening wave in emerging markets (starting with Asia) from 2Q onwards, which is likely the most significant growth driver this year. The impacts are likely twofold, starting with an uplift in domestic demand in these economies, followed by a global growth boost generated by an influx of cross-border tourism. The reopening should also continue to put Value in the spotlight. Drawing reference from the reopening of US and Europe, we believe investors’ focus will continue to shift towards re-opening stocks, companies that are highly leveraged to the economy and global activities. However, we believe they will increasingly be seeking undervalued re-opening stocks this time round, considering the greater margin of safety amidst the current risk backdrop. This will likely keep inflows to Value equities strong as many of these re-opening stocks are part of the Value composition. Lastly, it could just be because of people who believe that US is a declining global power. With many indications of its status of a global power in decline, such as high debt levels, low education levels, widening income gaps, it may be prudent to lower the overall holding of US stocks rather than holding 60% like when buying VTI. Hope this offers some perspective to new investors on why ETFs like VXUS can be be useful to tailor your stock holdings to lower or increase exposure to certain world regions. Other ETF examples may be $ISHRS CORE MSCI PACFC EX-JPN ETF USD ACC(CPXJ.UK)$ , $ISH EUROPE VALUE ETF EUR DIST(IEDL.UK)$ , $ISHRS EM INFR UCITS ETF USD (DIST)(IEMI.UK)$ . is meant to track the universe of foreign equities with exposure across mega-cap leaders down to the micro-cap companies. The name of game here is diversification to capture the high-level themes in international stocks as an important market segment while eliminating company-specific risk. Even as market conditions have been volatile at the start of 2022, there are plenty of reasons to maintain a positive outlook with international stocks well-positioned to move higher going forward. VXUS with an expense ratio of just 0.07% is a good choice as a core holding for investors to move beyond U.S.-centric portfolios and ultimately improve risk-adjusted returns over the long run. With such a great scale of diversification over the entire world, each respectively stock holding is very small, thus limiting idiosyncratic risks of any country or company doing badly for an extended period of time. We just hold and wait, hold and wait. Along with its super low total expense ratio of 0.07%, this etf is as good as free on a yearly basis, and can help you reap the rewards of long term investing without too much risk and volatility for those who can’t stomach and storms that are in the US market.
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