U.S. stocks are entering the ninth year of a bull run, but that doesn't mean there aren't investment opportunities in other parts of the world. Emerging markets are predicted to be hot in 2018, after coming off a strong year in 2017, and according to InvestorPlace, one way to play that is the Vanguard FTSE All World Ex-U.S. ETF (VSS).
InvestorPlace named VSS as the best exchange-traded fund (ETF) for 2018, with editor Jeff Reeves saying in a report that the fund ended last year up 30%, blowing past the returns of the S&P 500 and competing global ETFs. Reeves said that he likes the fund for several reasons, including the fact that it is focused on small-capitalization companies rather than larger companies outside the U.S., asserting that smaller international companies have good growth potential. While InvestorPlace said that around 38% of the fund's investments are in Europe, emerging markets make up 20%, which gives investors enough exposure. "This is enough to make this fund a good tactical bet on emerging markets growth without taking on too much risk on these volatile regions," said Reeves in the report.
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InvestorPlace also likes the breadth of the Vanguard FTSE All World Ex-U.S. Small Cap ETF, which has more than 3,500 components. According to Reeves, many emerging market funds have holdings in the range of a few hundred, but with 3,500 investments, the Vanguard ETF ensures that one bad choice won't negatively affect the overall performance of the fund. When investing in small-capitalization stocks in emerging markets, there are a lot of risks, and the large breadth provides a cushion.
On top of all that, Reeves pointed to the low-cost nature of the fund, which has annual expenses of 0.13%. "The fund costs you a measly $13 for every $10,000 invested. Not only is this inexpensive in a vacuum, it's incredibly cheap considering you get access to thousands of small international companies that you may never be able to hold a stake in otherwise," Reeves wrote. The editor of InvestorPlace noted that even investors who aren't looking for emerging markets exposure should consider the fund because it enables them to diversify their portfolios via one ETF. "In one Vanguard ETF, you get emerging markets plus developed global markets outside America plus small-cap exposure in those markets," said Reeves.