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Vanguard Total International Stock ETF: Slower Growth And Limited Visibility

Ploutos Investing profile picture
Ploutos Investing


  • VXUS invests in international large-cap and giant-cap stocks.
  • Despite its low concentration risk to individual stocks, the fund has higher exposure to slower growth economies such as Japan.
  • VXUS pays a 3.3%-yielding dividend and is trading at a discount to the S&P 500 Index due to its slower growth profile.

ETF Overview

Vanguard Total International Stock ETF (NASDAQ:VXUS) invests in international large-cap and giant-cap stocks. The ETF tracks the FTSE Global All Cap ex US Index, which includes over 7,000 stocks. These are quality large-cap or giant-cap stocks that have been through numerous economic cycles. However, the fund has a higher exposure to slower growth economies such as Japan. In addition, the outbreak of coronavirus may negatively impact stocks in its portfolio. Given limited visibility, we think investors may want to wait on the sidelines.

ChartData by YCharts

Fund Holdings

High exposure to Japan and China is not beneficial

VXUS provides investors with a good vehicle to invest in international markets. However, it has high exposure to markets such as Japan, United Kingdom, and China. As can be seen from the table below, Japanese stocks represent about 16.7% of the total portfolio. This is not beneficial as Japan's economy may be facing some challenging headwinds in the next decade due to its ageing population. In fact, it is facing structural decline in its population already. The country is expected to see its population decline by 5.6% in 2030 from the population level in 2017. In addition, Japan’s GDP is expected to only grow by 0.7% and 0.6% in 2020 and 2021, respectively (this was estimated before the outbreak of coronavirus). VXUS’ Chinese stocks may also be heading for a slowdown due to tensions between the U.S. and China and the outbreak of coronavirus. Looking forward, many global manufacturers are moving their production away from China in order to reduce the risk of having only one primary manufacturing base. Therefore, we expect China’s economic growth rate to continue to decelerate.

Source: Vanguard Website

No concentration risk in its top holdings

VXUS has a diversified portfolio with over 7,000 stocks in its

This article was written by

Ploutos Investing profile picture
I am a value focused investor. Stocks rise and fall for many different reasons that we often cannot predict. Eventually, it is those companies with a wide moat and the ability to generate cash flow that prevail. Therefore, my investment focus is to find value stocks that are able to generate cash flow, with sustainable dividends and provide growth over time. I focus my attention on analyzing large-capped dividend growth stocks, REITs and ETFs. I aim at providing a quarterly update and insights on stocks I follow. Please feel free to browse the articles that I wrote and provide any comments.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (1)

thumbsoup profile picture
Yeah, $VXUS is not exciting. I am a somewhat reluctant 401k investor in this index, there isn't anything else better for international equity exposure. Done little over the last decade.

Years ago, it was the inclusion of China that had me worried. A rollercoaster! Unstable!

Now, you are pointing out that Japan should have me worried. Dying! All slowly dying!

Comparing demographics, without paying for the linked report:

Japan has 2x the population of United Kingdom, the #2 country weight in the fund. So for population, not a bad starting point

But, the replacement fertility birth rate is around 2.1. Lower than that and you shrink

- Japan fertility rate is 1.4. uh oh. Shrinking -0.30% per year

- UK and US rate though is only 1.8. But population growing 0.60 to 0.70% per year due to immigration




Immigration could solve for Japan's low birth rate?

- Japan was actually increasing immigration since 1990, incongruent with the usual media story on xenophobia. But then it flatlined in the last decade, so not enough to stop the drop


Robots save the day?

"More recently, according to the International Federation of Robots, Singapore, South Korea and Germany have overtaken Japan in robots per worker."

Maybe not.


OR, take better advantage of HALF the population ALREADY IN Japan, WOMEN:

- Participation rate is much lower than men
- Japanese women concentrated in part-time, low-paying jobs
- Women are only 1% of senior managers

"Unsurprisingly, women bear the brunt of this unequal system. Of the women hired in 2018, almost three-quarters were shunted into irregular work. Fewer than half of working women hold full-time positions, compared to almost four out of five men."



The solution is living in your house. It is not built by Sony.
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