Why the Vanguard FTSE Developed Markets ETF (VEA) Is a Smart Choice for International Diversification

International stocks provide geographic diversification, potentially lowering risk tied to the U.S. economy. One of the best ways to tap into global markets is through exchange-traded funds (ETFs). The Vanguard FTSE Developed Markets ETF (VEA) stands out as an efficient, affordable choice for investors seeking international exposure.

Understanding the VEA ETF

The Vanguard FTSE Developed Markets ETF focuses on companies located in advanced economies, particularly across Europe and the Asia-Pacific regions. The portfolio’s top countries include Japan, the United Kingdom, Canada, France, and Germany. With about 3,800 stocks, the ETF offers extensive diversification. It uses a weighted index approach, so larger companies influence the fund more; however, no single company constitutes more than 1.3% of its assets.

VEA isn’t filled with obscure businesses. Its top holdings comprise household names like Nestle, ASML Holding (a leader in semiconductor equipment), Novartis, Toyota, and Novo Nordisk. These are major global companies—just headquartered outside the U.S.

Low-Cost Investing

A significant advantage of the Vanguard FTSE Developed Markets ETF is its cost efficiency. The fund recently reduced its already low expense ratio to just 0.03%. This means investors pay only $3 annually in fees for every $10,000 invested, making it one of the cheapest ways to access international markets.

Performance Overview

Here’s how the VEA ETF has performed over recent periods (as of June 30, 2025):

• 1 year: 18.9% annualized return
• 3 years: 15.3% annualized return
• 5 years: 11.4% annualized return
• 10 years: 6.8% annualized return

Notably, the ETF currently trades at an average price-to-earnings (P/E) ratio of about 16, which is far lower than the S&P 500’s average P/E of roughly 26. This suggests that VEA is relatively inexpensive compared to U.S. stocks, despite its strong recent momentum.

Long-Term Wealth Building Potential

While there’s no guarantee that past returns will repeat, long-term annual returns between 8% and 10% are considered reasonable expectations. If the fund achieves a 9% annual return, a single $1,000 investment could potentially grow to approximately $5,600 over 20 years. Contributing $1,000 annually over two decades (a total of $20,000 invested) could compound to nearly $57,000 at the same return rate.

The key to maximizing potential with index funds like VEA is to invest consistently over time. Regular contributions can help investors harness the benefits of compounding returns and international diversification.

Bottom Line

The Vanguard FTSE Developed Markets ETF is an accessible, low-cost way to gain exposure to leading companies in developed international markets. With its broad diversification and minimal fees, VEA can be a valuable addition to a long-term investment portfolio.

This content is for informational purposes only and does not constitute financial advice.