Are you looking to increase your investment portfolio? What investment strategy will provide you with the best total return and dividend to grow your investment portfolio? Let’s discuss IXUS vs. VXUS and see which fund is better for you.
Many investors invest in domestic stock portfolios and combine them with international equity exposure. However, most international equity funds still invest a part of their portfolios in US-based companies.
If you want to have a purely international equity exposure that American companies don’t dilute, the Global ex-US ETFs (Exchange-Traded Funds) are a good option. These funds invest in stocks from all parts of the world while specifically avoiding US-based stocks.
Two of the most popular ETFs that provide exposure to the international market while avoiding the local US markets are IXUS and VXUS. Both funds are a good choice for adding the much-needed global diversification, with the potential to improve your overall returns and reduce volatility.
If you consider one of the two, you may be wondering which one to choose. Let’s find out in this IXUS vs. VXUS review.
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IXUS: iShares Core MSCI Total International Stock ETF
One of the most broadly assorted international stock ETFs is the iShares Core MSCI Total International Stock ETF or IXUS. The fund’s goal is to follow the MSCI ACWI ex USA IMI Index, consisting of large-cap, mid-cap, and small-cap stocks from emerging and developed countries.
It uses market capitalization to weigh them, an approach that benefits investors as it captures the collective opinion of every stock while maintaining low turnover.
The fund’s underlying index is a free float-adjusted market capitalization index, measuring the equity market’s performance in emerging and developed market countries outside the United States. The fund consists of 4,290 holdings and assets worth over $31 billion.
VXUS: Vanguard Total International Stock Index Fund ETF Shares
VXUS or Vanguard Total International Stock Index Fund ETF Shares is an ETF that uses index sampling to follow the FTSE Global All Cap ex-US Index. It’s the most popular international stock ETF from Vanguard. This is because the fund’s expense ratio is low at 0.08%, enabling investors to get affordable access to the global stock market.
The fund has assets of over $51.85 billion under its management. The fund doesn’t include stocks from the United States. Instead, it focuses on emerging and developed markets outside the US.
This is one of the widely invested ETFs and has invested in over 7,468 equities from around the globe.
IXUS Vs. VXUS: Key Differences
Here are some key differences between the two:
Issuer
Both IXUS and VXUS are closely related as they are both international stocks large blend funds, which means that they are likely to be investing in similar investments.
Vanguard issues VXUS while iShares is the company behind IXUS. As one of the biggest global ETFs, iShares has made a name for itself for its well-composed funds at a decent expense ratio.
Fund Size
Both funds can be categorized as large funds. The number of assets between VXUS and IXUS is similar. The assets under VXUS are worth $51.85 billion, IXUS has assets worth $31.88 billion.
While the fund size doesn’t indicate how good or bad a fund is, it shows investors’ faith in a fund.
Stocks Held
The IXUS follows the MSCI ACWI ex USA IMI Index with a similar approach to VXUS but with one difference; the number of stocks held in VXUS is double what is held in IXUS. Both ETFs don’t include stocks from the US.
Regional Allocation
The focus of VXUS is mainly on the developed markets. The stocks of European companies take the lion share with 40.40% of the fund comprising stocks from Europe. Asia-Pacific follows next with 27.00% of the securities from the region. The other 25% of stocks are made up of emerging markets.
While IXUS provides investors with exposure to a broad international portfolio, it ignores economies in the emerging markets, particularly in Latin America, Southeast Asia, and Eastern Europe. Instead, it focuses more on the Asia-Pacific regions, especially in China and Japan, which account for over 27% of the fund’s market capitalization. European stocks follow this regionally in the UK, France, and Germany.
With this in mind, investors who want to have a much-diversified basket of international equities should consider supplementing their portfolio with another ETF such as VXUS. While the picture of the two looks very similar, IXUS is more exposed to particular countries than VXUS. This is because VXUS has more securities, resulting in a bigger diversification.
Inception Date
While VXUS was incepted on the 26th of January 2011, IXUS was issued on the 18th of October 2012.
Holdings
VXUS has 7,707 stocks in its holdings, while IXUS has 4,290 stocks.
VXUS top 10 holdings:
| Asset | Percentage |
| Taiwan Semiconductor Manufacturing Co. Ltd. | 1.62% |
| Tencent Holdings Ltd. | 1.41% |
| Alibaba Group Holding Ltd. | 1.26% |
| Nestle SA | 1.10% |
| Samsung Electronics Co. Ltd. | 1.05% |
| ASML Holding NV | 0.86% |
| Roche Holding AG | 0.81% |
| Toyota Motor Corp. | 0.67% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.61% |
| Novartis AG | 0.60% |
IXUS top 10 holdings:
| Asset | Percentage |
| Taiwan Semiconductor Manufacturing Co. Ltd. | 1.77% |
| Nestle SA | 1.24% |
| Tencent Holdings Ltd. | 1.05% |
| ASML Holding AG | 1.03% |
| Samsung Electronics Co. Ltd. | 0.99% |
| Roche Holding AG | 0.91% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.72% |
| Alibaba Group Holding Ltd. | 0.70% |
| Toyota Motor Corp. | 0.61% |
| Novartis AG | 0.59% |
IXUS Vs. VXUS: Composition Differences
Around 75% of VXUS is made of large-cap companies, and the mid-cap securities make the remaining 20%, while about 6% consist of small-cap companies. This distribution is similar to those in the developed stock markets.
About 22% of VXUS’s total capitalization is in the financial sector. This is followed by technology at 15.93% and industrials at 13.41%. Consumer cyclical takes the top 4 at 11.34%.
IXUS has an almost similar market capitalization as 73% of the fund is made of large-capitalization stocks. The mid-capitalization stocks make 20%, while the small-capitalization stocks make 7%. Therefore, the main difference between VXUS and IXUS is that IXUS is a bit more exposed to small-cap companies than VXUS.
IXUS is dominated mainly by the financial sector, accounting for 21.24% of the fund. This is closely followed by IT at 16.61% and industrials at 13.21%.
However, overall, both funds are weighted evenly among different sectors. IXUS and VXUS provide a more balanced exposure than the domestic market distribution.
IXUS Vs. VXUS: Performance Differences
VXUS has a very mixed performance history. While it had positive results in most of its years, there were several years (between 2014 and 2016) when it had almost zero returns. But on the other hand, there are many instances when VXUS was able to outperform IXUS. One such scenario was in 2013 when VXUS had a better performance than IXUS.
VXUS has a compound annual growth of 4.03% compared to IXUS at 3.87%. This means that if you invested $10,000 in VXUS, you would have ended up with an increase of $13,492 in 10 years. An investment of $10,000 in IXUS would have translated into a return of $13,335.
When we compare that to the average stock market return of 7%, you can see that the ex-US portfolio didn’t outperform at that level over the last decade. Let’s hope that the next decade goes the other way.
VXUS Performance & Returns:
| Returns | Percentage |
| YTD Returns | 10.30% |
| 1-Month Return | -0.34% |
| 3-Month Return | 5.57% |
| 1-Year Return | 37.19% |
| 3-Year Return | 9.64% |
| 5-Year Return | 11.15% |
| 10-Year Return | 5.66% |
IXUS Performance & Returns:
| Returns | Percentage |
| YTD Returns | 8.87% |
| 1-Month Return | 3.55% |
| 3-Month Return | 1.87% |
| 1-Year Return | 8.87% |
| 3-Year Return | 13.63% |
| 5-Year Return | 9.99% |
| 10-Year Return | NA |
IXUS Vs. VXUS: Fees
The expense ratio of VXUS is 0.08%. This is a very reasonable charge considering that this is an international fund. On the other hand, IXUS has an expense fee of 0.09%. This is slightly more expensive than VXUS.
On an investment of $10,000, the difference in fees is about $1 per year. These management fees come into play when you decide which funds and ETFs you will consider for your financials.
IXUS Vs. VXUS: Volatility
The annual volatility of VXUS is 13.82%, which translates to 3.99% monthly. This is a fair value when you are comparing 100% stock portfolios. At a volatility rate of 13.82%, VXUS is usually less volatile than the domestic market.
The annual volatility of IXUS is 13.52%, which translates to 3.90% monthly. When you consider that VXUS is more diversified than IXUS, you see that it’s surprising that VXUS is more volatile than IXUS.
VXUS Vs. IXUS: Which International Ex-Us Fund Is Better?
When we compare the two, we see that VXUS has a higher return and a higher growth rate than IXUS. However, their performance is still lower than other funds, which may arise whether it’s worth investing in any of the two.
The answer to the question is yes. Various studies show that international exposure can help mitigate certain risks associated with a local fund, and it also opens up the possibility of better returns in the long term.
Now that you have read through the ins and outs of these ETFs, it’s time to take a risk-adjusted and educated decision on which of these will help your investment objective. These asset classes will help you diversify your investment strategies and build accumulating assets along the way.
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Founder of Spark Nomad, Radical FIRE, Journalist
Expertise: Personal finance and travel content
Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Radical FIRE, a personal finance platform, and Spark Nomad, a travel platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.