What VEA actually is

VEA is Vanguard’s ETF for developed markets outside the United States. It follows the FTSE Developed All Cap ex US Index, which holds nearly 4,000 large, mid and small companies in Canada and the major markets of Europe and the Pacific region. Think of companies like Nestlé, ASML, Toyota or Shell.

It launched in 2007 and is one of the most popular ways to add international stocks to a portfolio.

What is inside

The fund is weighted by company size, and it does not buy emerging markets, so it focuses on economies such as the UK, Japan, Canada, France, Germany and Australia. Sectors are more balanced than in US funds: financials, industrials and healthcare have bigger weights, while technology has a smaller one.

That mix is what makes it useful for diversification. When US technology leads, international stocks can lag, and the reverse also happens.

Costs and distributions

VEA pays dividends quarterly. The yield has typically been higher than for US index funds, because many foreign companies pay out a larger share of their profits.

Foreign dividends can be subject to withholding tax in the country of origin. In many cases a portion can be recovered through tax credits, but the rules depend on where you live.

What to keep in mind

  • Currency risk. Returns are affected by movements between the dollar and foreign currencies.
  • Slower growth at times. International developed markets have often lagged US stocks over the last decade.
  • Political and economic differences. Each region has its own risks.

Quick take

VEA is a diversified way to own the rest of the developed world. It works as a complement to a US fund such as VTI or VOO, and it generally adds some dividend yield to the mix.