VXUS vs. VEU: one extra dollar a year per $10,000 for the smaller companies

For a fund that owns stocks outside the United States, buy Vanguard Total International Stock ETF, VXUS, not Vanguard FTSE All-World ex-US ETF, VEU. VXUS holds nearly all of what VEU holds, plus the smaller companies. The extra charge is $1 a year on a $10,000 holding.

VEU has the better record, by 0.16 percentage points a year over the ten years through September 30, 2026. That gap is the smaller companies, which lagged. It is the cost of owning them, not a reason to leave them out.

If you already hold VEU in a taxable account, keep it. In an IRA, or any other account where a sale is not taxed, switch to VXUS.

The same stocks, plus smaller companies

VEU tracks the FTSE All-World ex US Index. VXUS tracks the FTSE Global All Cap ex US Index. Vanguard's February 27, 2026 prospectuses describe the FTSE All-World ex US Index as large- and mid-cap stocks in developed and emerging markets outside the United States, and the FTSE Global All Cap ex US Index as large-, mid-, and small-cap companies in those markets.

As of September 30, Vanguard counted 3,810 stocks in VEU and 8,901 in VXUS. Vanguard classed 8.1% of VXUS as small companies that day.

VXUS holds 99% of the companies in VEU.

Why VEU has the better record

Through September 30, VEU was ahead on the one-year, five-year and ten-year windows. These are net asset value total returns from Vanguard's fact sheets.

The gap belongs to the indexes. Index returns include no fund fee, and over these windows Vanguard compares VXUS with the FTSE Global All Cap ex US Index.

That index trailed the FTSE All-World ex US Index by 0.63 percentage points over the year, 0.33 percentage points a year over five years and 0.17 percentage points a year over ten. The funds' own gaps were within a couple of hundredths of a percentage point of those.

Over ten years, each fund trailed its own index by about a tenth of a percentage point a year.

Smaller companies were the part that lagged. On September 30, Vanguard reported a 12.52% one-year return and a 7.60% annualized ten-year return for the FTSE Global Small Cap ex US Index. The FTSE All-World ex US Index returned 19.65% and 9.47% over those same windows.

Leaving those companies out helped for ten years because they trailed. It helps again only if they trail again. VXUS owns them either way. Over those ten years, that choice cost 0.16 percentage points a year, about $356 on $10,000.

From here, the price of the smaller companies is the fee. VXUS charges 0.05% and VEU charges 0.04%, the rates in the February 27, 2026 prospectuses. On $10,000, the difference is $1 a year.

Since September 30 the lead has widened. Vanguard's year-to-date net asset value returns were 13.76% for VEU and 13.38% for VXUS that day, a lead of 0.38 percentage points. By November 2, 2026, VEU was at 10.63% and VXUS at 10.08%, a lead of 0.55 percentage points.

If you already own VEU

Put new money in VXUS. If you hold VEU in an IRA, or in any other account where a sale is not taxed, switch to VXUS. You pick up the smaller companies, and there is no tax on the trade.

If you hold VEU in a taxable account, keep it. The portfolios are close, and the ten-year difference was about $356 on $10,000. A tax on the sale can cost more than that.

VEU is the better buy only if you have decided you do not want the smaller companies. The last decade rewarded that decision. That record does not make VEU the default.