The lowest-cost option in terms of expense ratio has been the combination of VTS (US Total Market) and VEU (All-World ex-US). But this requires investment in multiple funds, and these funds are cross-listed US funds which can make VEU, in particular, less tax-efficient.
The alternative was an all-in-one international ETF such as WXOZ (World ex Australia) or IOO (Global Top 100). Unfortunately both of these come at a higher cost (around 0.4% p.a.) and are less diversified in their holdings. IOO is also a US-listed fund.
Vanguard have now made their International Shares Index Fund (excluding Australia) available as an ETF. This comes with a low expense ratio of 0.18% p.a. (0.21% p.a. for a currency hedged version), around half the price of competing ETFs.
| ETF | Code |
|---|---|
| Vanguard® MSCI Index International Shares ETF | VGS |
| Vanguard® MSCI Index International Shares (Hedged) ETF | VGAD |
The underlying International Shares Index Funds have been running since 1997 with a strong record of tracking (or even exceeding) their index. The funds track an index of over 1,500 stocks across 22 developed countries.
Liquidity of the ETF is not great, with spreads around the 0.25-0.3% mark. However this is already comparable to WXOZ and also to the buy-sell spread of the underlying index fund.
Overall this is great value. It may not suit everyone; for example, some may prefer separate allocations to the US and other countries, and it does not include Emerging Markets or Small Cap stocks. But I view it on balance as the lowest-cost product overall in the market for international shares available today, so much so that I'll be editing my most recent post to include VGS.
Links:
Vanguard Exchange Traded Funds
MSCI World ex Australia Index
