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Looking Beyond the S&P 500: Two Vanguard ETFs to Consider
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Published in Stocks and Investing on Wednesday, November 19th 2025 at 21:38 GMT by The Motley Fool- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Looking Beyond the S&P 500: Two Vanguard ETFs to Consider
For many investors, the S&P 500 is the default benchmark for U.S. equities. It’s a convenient shorthand for “the U.S. market” and the performance of the largest 500 publicly traded companies. But the U.S. equity universe is much larger than that. If you’re looking to broaden your portfolio—whether to capture the growth of small‑cap companies, diversify into international markets, or simply reduce the concentration that comes with an S&P‑heavy allocation—Vanguard offers two ETFs that can help you do just that.
1. Vanguard Total Stock Market ETF (VTI)
Why VTI?
VTI tracks the CRSP U.S. Total Market Index, which includes all publicly traded U.S. stocks—large, mid, small, and micro‑cap. That means you’re not just getting the 500 biggest names; you’re also getting the 2 500 companies that fall outside the S&P 500 but still play a role in the overall market.
| Feature | VTI |
|---|---|
| Expense Ratio | 0.03 % (as of 2024) |
| Holdings | ~4,000 U.S. companies |
| Market Cap Coverage | 100 % of U.S. equity market |
| Dividend Yield (2023) | ~1.9 % |
The ETF’s composition mirrors the U.S. market’s overall sector mix but with a heavier tilt toward small‑cap growth stocks. That can enhance long‑term returns, especially in a low‑interest‑rate environment where growth sectors often outperform value. The low expense ratio makes it one of the most cost‑efficient ways to get full market exposure.
Performance Snapshot
Over the past decade, VTI has trailed the S&P 500 by roughly 0.2 % per year— a small difference that disappears when you consider the broader market risk you’re taking on. Because it includes small and mid‑cap stocks, VTI tends to be more volatile than the S&P, but that volatility can translate into higher upside during bull markets.
2. Vanguard FTSE All‑World ex‑US ETF (VEU)
Why VEU?
If you want to diversify beyond the U.S., VEU offers an easy way to own a broad basket of global stocks that excludes the U.S. market. The ETF tracks the FTSE All‑World ex‑US Index, covering developed and emerging markets alike.
| Feature | VEU |
|---|---|
| Expense Ratio | 0.08 % (as of 2024) |
| Holdings | ~6,000 non‑U.S. companies |
| Geographic Exposure | 23 developed + 27 emerging markets |
| Dividend Yield (2023) | ~2.0 % |
VEU’s holdings include giants such as Samsung, Nestlé, and Toyota, as well as smaller, fast‑growing firms in emerging economies. The fund provides exposure to over 90 % of the world’s equity market, minus the U.S.
Performance Snapshot
Over the last ten years, VEU’s returns have been roughly 1–2 % below the S&P 500, reflecting the historically higher risk associated with international equities and currency fluctuations. However, the ETF’s broad exposure can help mitigate the idiosyncratic risk of any single country or region.
Why Diversify Beyond the S&P 500?
- Small‑Cap Growth – The S&P 500 is heavily weighted toward large, stable companies. Small‑cap stocks often deliver higher growth, albeit with higher risk. VTI brings that upside into a single investment.
- International Exposure – Relying solely on U.S. markets can expose you to “home bias.” VEU offers a cost‑effective, broad global allocation.
- Sector Balancing – Certain sectors, such as utilities or consumer staples, may be under‑represented in the S&P 500 relative to the full market. Both VTI and VEU help broaden sector exposure.
- Inflation Resilience – Diversifying across economies and market caps can help buffer against localized inflation shocks.
- Reduced Concentration – Even a modest weighting of 20–30 % to an S&P‑500 ETF leaves a large portion of your portfolio open to other opportunities. VTI and VEU can occupy that space efficiently.
How to Integrate VTI and VEU Into Your Portfolio
| Allocation | Reasoning |
|---|---|
| 40 % VTI | Full U.S. market exposure, low cost, growth potential |
| 20 % VEU | Global diversification, currency and region exposure |
| 20 % Core S&P 500 ETF (VOO, VOO) | Traditional benchmark, stability |
| 10 % sector or thematic ETFs | Targeted growth in areas like tech, healthcare |
| 10 % cash or equivalents | Liquidity and flexibility |
This is just one example; the exact mix will depend on your risk tolerance, time horizon, and investment goals. For many investors, simply adding VTI and VEU to an existing S&P‑500 position can shave off a few percentage points of risk while adding modest upside potential.
Bottom Line
If you’re looking to step outside the S&P 500, Vanguard’s Total Stock Market ETF (VTI) and FTSE All‑World ex‑US ETF (VEU) provide two of the simplest, lowest‑cost ways to do so. VTI gives you complete U.S. exposure, including the small‑cap segment that can add growth to a portfolio. VEU adds a global perspective that can reduce concentration risk and open doors to opportunities outside the U.S. market. Together, they can form the backbone of a diversified, cost‑effective equity strategy that looks beyond the familiar 500‑company benchmark.
Read the Full The Motley Fool Article at:
[ https://www.msn.com/en-us/money/mutualfunds/want-to-invest-in-stocks-outside-of-the-s-p-500-consider-these-2-vanguard-etfs/ar-AA1QBhXp ]
