VEU vs VXUS: Which Will Win Me Better Returns?

Trying to decide if you should invest in VEU vs VXUS? We’ve got you covered in our complete breakdown

Updated April 2024
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Fact checked by Cathy Gresham
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Vanguard’s two international ETF offerings are so similar, it’s tough to distinguish them enough to decide which to invest in if you want international exposure.

We take a rapid look a the performance, composure, and risks of these two funds.

VEU vs VXUS executive summary

  • Historically, the performance of these two funds has been nearly identical. If forced to choose, for a long-term hold strategy, we would select VXUS, hoping that its greater small-cap holdings will outperform given a longer time horizon.
  • Both funds have substantially underperformed the S&P500 over the past ~10 years.
  • If you do want exposure to one of these funds, you should be able to use the other to tax loss harvest. 

VEU and VXUS: what exactly are they?

VEU and VXUS are international (excluding the US) exchange-traded funds (ETFs) offered by Vanguard.

Both seek to offer investors broad exposure to the global equities market outside of the United States. If you’re looking for a Vanguard fund that just invests in the total world equities including the US, try looking at VTWAX.

As you would expect from Vanguard, both have very low expense ratios at 0.07%.

Vanguard gives a risk score of ‘5’ on its scale to both funds, its highest/most aggressive score.

The attempt to track very similar, but slightly different indices. VEU tracks the FTSE All-World ex US index, while VXUS tracks the FTSE Global All Cap ex US Index.

For most investors, this essentially provides the same investment exposure. In fact, most of the top 10 holdings of both funds are made up of the same companies. The biggest difference between the funds is that VXUS has nearly double the number of holdings of VEU, typically hovering around 7,000 compared to VEU’s 3,500. These additional holdings are mostly small-cap companies.

This difference hasn’t really changed performance outcomes, however, as we will see below.

VEU and VXUS: performance outcomes

Measuring since VXUS’ inception in 2011, these two funds’ performance has been nearly identical. And dismal. Both have performed very poorly and if you had invested in either in 2011, you would be quite disappointed if you had held that investment through today.

Both have only returned an annual CAGR of about ~4% since 2011.

Performance: VEU vs VXUS

Since VXUS launched in 2011 the two funds’ performance has been nearly indistinguishable from one another. In fact, if you look at the graph below, it’s hard to even see where the two lines diverge, they look like one line. 

The data tends to confirm this, with a very slight edge to VXUS, which grew at a CAGR of 4.12%, compared to VEU’s 4.03%. Hardly impressive for an equity fund. Checking rolling returns over different time periods (see below) tends to confirm that the two are funds are nearly the same from a performance perspective. 

Rolling return stats

Performance: VEU and VXUS vs the S&P500

As you can see below, both funds’ performance against the S&P500 over the past decade or so has been exceptionally bad. While the S&P500 is neither fund’s benchmark, it is a benchmark we like to check against any investment.

If you had invested and stuck with the S&P500 in 2011, you would have quadrupled your investment, while not even doubling in VEU and VXUS.

With both funds hovering around an unimpressive ~0.3 Sharpe ratio and ~0.4 Sortino ratio, we’re left unimpressed.

While we can understand the value in diversifying investments, this level of performance is extremely disappointing and will have us looking elsewhere to find exposure outside of the United States. 

VEU and VXUS vs S&P500 stats
VEU and VXUS vs S&P500 graph

What about tax loss harvesting?

We should emphasize here that we are not tax law or securities law experts or professionals. 

However, these two securities look like a good opportunity for tax loss harvesting. While, based on historical performance, you’re likely to have the same exposure, the funds are substantially different, since VXUS contains ~7,000 companies to VEU’s only ~3,500.

If you’re thinking of tax loss harvesting with these two securities, but are unsure, you can likely call your brokerage and check. Most large brokerages maintain lists of securities that they consider too similar to tax loss harvest and you can just ask them if these (or any other pair) are on their list. While that’s still no guarantee, large brokerages have the resources, like securities lawyers, to know what’s reasonable in the eyes of the SEC. 

VEU and VXUS: basic stats

When you check out the fund side-by-side comparison below, you’ll see why their performance has been so similar. 

We’re still surprised that there is not a bit more of a difference given that VXUS holds twice as many companies as VEU.

Although VEU had a 4-year headstart on VXUS, VXUS has wildly exceeded VEU’s total holdings at ~$350B to ~$50B. 

VEU and VXUS basic fund information
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Bottom line: are we investing?

In the battle of VEU vs VXUS it seems that the S&P500 has won.

While we understand the benefits of diversification outside of the United States, the performance here is so bad, we will just have to go on looking for that diversification somewhere else. 

Editor's Note:

At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.

Author bio:

Cody Beecham

Cody Beecham

Founder/Owner/Editor/Author

Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School. 

After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.

Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income. 

He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?

Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.