The Top 3 Vanguard ETFs of 2025 (So Far): A Common Denominator Revealed

Discover the top-performing Vanguard ETFs of 2025 and learn why they all share a surprising focus on international stocks. With Vanguard offering a diverse range of 90 ETFs, it's fascinating to see how these top three are leading the way in performance.

Introduction

As we dive into 2025, Vanguard's exchange-traded funds (ETFs) are making waves, especially in the international market. This article explores the top three Vanguard ETFs so far this year, all of which share a striking commonality: their focus on international stocks. From impressive returns to attractive valuations, these ETFs are worth considering for your investment portfolio.

The Vanguard ETF Landscape

Vanguard's ETF offerings are vast, catering to a variety of investment strategies:

• Sector-Focused ETFs: Target specific U.S. sectors.
• Market-Cap Focused ETFs: Include large-cap, mid-cap, and small-cap stocks.
• Growth vs. Value: Options for both growth and value stock investments.
• Bond ETFs: Invest in bonds with varying maturities.

Why Focus on International Stocks?

The top three Vanguard ETFs of 2025 have one thing in common: they all concentrate on international stocks. Here’s a closer look at these standout performers:

Top 3 Vanguard ETFs of 2025

1. Vanguard FTSE Europe ETF (VGK)

   • Year-to-Date Return: Approximately 12%
   • Stocks Held: 1,263 stocks from key European markets such as Germany, France, and the UK.

2. Vanguard International High Dividend Yield ETF (VYMI)

   • Year-to-Date Return: Nearly 10%
   • Stocks Held: 1,491 stocks, including top holdings like Nestlé and Roche.
   • European Exposure: Nearly 45% of its stocks are based in Europe.

3. Vanguard FTSE Developed Markets ETF (VEA)

   • Year-to-Date Return: Over 8%
   • Stocks Held: 3,910 international stocks ranging from large-cap to small-cap.
   • Top Holdings: Includes SAP, Novo Nordisk, and ASML.

Why Are These ETFs Performing So Well?

The success of these Vanguard ETFs can be attributed to several factors:

• Attractive Valuations: European stocks, in particular, are viewed as more attractively valued compared to their U.S. counterparts. For instance, VGK's P/E ratio stands at 17.4, while the Vanguard S&P 500 ETF is at 26.9.
• Rising Defense Spending: European nations, including Germany, are increasing their defense budgets, benefiting defense-related stocks.
• Positive Economic Indicators: Recent economic data from Europe has surpassed expectations, showing improvements across various sectors including banking and manufacturing.
• Optimism for Peace: Hopes for a resolution to the conflict between Russia and Ukraine could lead to reduced energy prices and increased investments in reconstruction.

Should You Invest in These Vanguard ETFs?

While the performance of international stocks remains strong, investors should proceed with caution. Here are some considerations:

• Potential for Continued Outperformance: International stocks may continue to outperform U.S. stocks in the near term, making these ETFs appealing.
• Risks of Trade Wars: A prolonged trade conflict could negatively impact both U.S. and international stocks.
• Diversification Benefits: Investing in these ETFs can enhance portfolio diversification, but it’s essential to avoid overcommitting based on current trends.

Conclusion

The Vanguard FTSE Europe ETF, Vanguard International High Dividend Yield ETF, and Vanguard FTSE Developed Markets ETF are leading the charge in 2025, primarily due to their focus on international stocks. While they present exciting opportunities for investors, careful consideration and research are crucial before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research or consult a licensed financial advisor before making investment decisions.