Investors choosing between Vanguard Total World Stock ETF (NYSEMKT:VT) and State Street SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) must decide whether to include U.S. equities in a single global fund or separate them for tactical control.
Both funds serve as core building blocks for international exposure. While VT covers approximately 98% of the world’s investable market capitalization, SPDW focuses on developed markets outside the U.S., allowing investors to pair it with domestic-only funds to customize their geographic allocation.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield calculated on the July 1 closing price.
Cost-conscious investors may prefer the State Street fund, which carries a razor-thin 0.03% expense ratio. The Vanguard fund’s 0.06% fee is also remarkably low for a global fund, though its 1.60% yield is significantly lower than the 3.00% payout from the ex-U.S. option.
Performance & risk comparison
What’s inside
The Vanguard Total World Stock ETF provides exposure to 10,024 holdings across developed and emerging markets. Its sector allocation is heavily tilted toward technology at 31.1%, followed by financial services at 15.2% and industrials at 11.4%. Its largest positions include Nvidia Corp. (NASDAQ:NVDA) at 4.2%, Apple Inc. (NASDAQ:AAPL) at 3.8%, and Microsoft Corp. (NASDAQ:MSFT) at 2.8%. It was launched in 2008. The fund has paid $2.48 per share over the trailing 12 months, which on its recent $156.12 share price works out to a 1.6% yield.
The State Street SPDR Portfolio Developed World ex-US ETF focuses on non-U.S. developed markets with 2,416 holdings. Sector weights differ significantly, with financial services at 22.2%, industrials at 18.4%, and technology at 16.8%. Its largest positions include Samsung Electronics GDRs at 3.1%, Sk Hynix Inc (KOSE:A000660) at 2.5%, and Asml Holding Nv (NASDAQ:ASML) at 1.8%. It was launched in 2007. The fund has paid $1.52 per share over the trailing 12 months, which, on its recent $49.76 share price, works out to a 3% yield.
Which fund is the better buy?
If you are looking for pure performance history or a one-stop shop for global equities, then the Vanguard Total Stock Market ETF is your choice. However, there is a legitimate argument that a balanced stock portfolio should include holdings with greater exposure to non-U.S. markets. Odds are if you own other ETFs with U.S. holdings, you own many of the same names already. VT holds about two-thirds of its assets in U.S. stocks because the U.S. accounts for a dominant share of global stock market value.
The State Street SPDR Portfolio Developed World ex-US ETF is as advertised: a fund that doesn’t hold U.S. stocks. The fund is about 21% in Japanese equities, 11.7% U.K. listings, and 11% Canadian stocks, with the rest of the developed world filling out the balance. It’s more heavily weighted toward large-cap stocks than VT, at 81% vs. 76% of holdings.
If geographic exposure or the higher income from SPDW aren’t differentiators for an investor, then performance should be.
The Vanguard fund has bested the State Street offering in the 3-, 5-, and 10-year time frames, returning 19.7%, 10.9%, and 12.8%, res[ectively compared to 19.2%, 9.8%, and 10.4%. However, SPDW is beating VT in the year-to-date and 1-year lookbacks, at 14.4% YTD and 28.3% over 52 weeks, compared to 12% YTD and 24.3% over 1 year for Vanguard.
These are both well-performing, low-cost funds. SPDW’s cost, yield, and strong performance throughout the past decade make it the pick here.
For more guidance on ETF investing, check out the full guide at this link.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
Vanguard VT vs State Street SPDW Global ETF Showdown. Which World-Spanning Fund Is the Better Buy? was originally published by The Motley Fool