Vanguard VXC ETF Review 2022: Invest Internationally

Diversifying your investment portfolio outside Canada through exposure to international securities can provide you with a degree of capital protection when the domestic markets are not performing well.

However, creating and maintaining a self-directed portfolio of international stocks could eat into any returns through the fees for several individual trades and a host of other charges that might come along with it in taxes and other expenses.

Investing in a Canadian ETF that tracks the performance of international equity securities could provide you with a convenient and low-cost method to achieve that goal.

My Vanguard VXC ETF review will discuss a fund that you could consider for this purpose.

Our Verdict
Vanguard VXC ETF Review
8.5/10Our Score

Vanguard VXC ETF

Invest In Emerging and Developed Markets Excluding Canada

Invest in the Vanguard VXC ETF to leverage the performance of a broad global equity index that focuses on developed and emerging markets, excluding Canada.

Pros
  • Low-cost method to invest in a globally diversified portfolio of stocks
  • Reduced capital risk
  • Uses efficient and cost-effective index management techniques
  • Diversifies investment capital across several sectors
Cons
  • Might be too heavily focused on the US stock market

What Is Vanguard VXC ETF?

Vanguard Logo

Vanguard FTSE Global All Cap ex Canada Index ETF (VXC) is a passively managed ETF designed to provide you with investment returns by tracking the performance of a broad global equity index that focuses on developed and emerging markets worldwide, outside of Canada.

The fund tracks the performance of the FTSE Global All Cap ex Canada China A Inclusion Index.

The underlying index invests primarily directly or indirectly in small-, mid-, and large-capitalization companies throughout developed and emerging market countries besides Canada.

Vanguard VXC ETF allocates assets to investing and holding securities based on their respective weightings in the underlying index, providing you with performance returns before expenses. Vanguard VXC ETF is a low-cost fund that was listed on the TSX on July 7, 2014.

The fund has $1.3 billion in Assets Under Management (AUM) as of January 28, 2022. The equity-focused fund entails a relatively higher degree of capital risk compared to funds that also invest in fixed-income assets, but it diversifies across several global market equity securities to mitigate capital risk.

What Does Vanguard VXC ETF Invest In?

What Does Vanguard VXC ETF Invest In?

This section of my Vanguard VXC ETF review will cover what the fund invests in. VXC ETF attempts to track the FTSE Global All Cap ex Canada China A Inclusion Index to the best of its ability and before fees and expenses.

The underlying index focuses on tracking the performance of a group of publicly-traded companies listed in emerging and developed market countries worldwide, excluding Canada and including China.

As of December 31, 2021, Vanguard VXC ETF invests in 11,239 securities, offering you exposure to a heavily diversified portfolio of securities in the form of a single investment product.

The fund allocates 23.8% of its assets to the tech sector, 15.4% to the consumer discretionary sector, and 13.7% to industrial sector stocks. VXC ETF also allocates 13.1% of its assets to financial sector stocks worldwide, outside of Canada.

VXC ETF is a 100% equity-focused fund. Without exposure to any fixed-income securities, the fund entails a higher degree of capital risk that it tries to mitigate by diversifying its exposure across various emerging and developed markets worldwide.

Vanguard VXC ETF Asset Allocation

This section of my Vanguard VXC ETF review would typically discuss the asset allocation split that the fund offers you between equity securities and fixed-income assets, like bonds and GICs.

However, Vanguard VXC ETF invests its assets entirely in the stock of publicly-listed companies throughout global emerging and developed markets countries.

The asset allocation I will discuss for the fund will be on the geographical weightings of its holdings.

Vanguard VXC ETF Holidngs

As of December 31, 2021, Vanguard VXC ETF focuses almost two-thirds of its assets to US-listed companies. It allocates 61.5% of its AUM to the stock of companies in the US. Its second-largest geographical asset allocation is towards Japan-based companies.

The fund allocates 6.3% of its AUM to equity securities listed in Japan. UK-listed securities account for the third-largest portion of its asset allocation, with 4.1% of its AUM invested in publicly-traded companies in the UK.

The fund also invests in emerging markets countries like China and India, allocating 3.6% and 1.6% of its AUM to equity securities in these two countries.

Vanguard VXC ETF Top Holdings

This section of my Vanguard VXC ETF review will cover the top holdings for the fund.

Vanguard VXC ETF Top Holdings

Vanguard VXC ETF invests a significant portion of its assets in US-listed securities, and its top ten holdings consist of US stocks. The most notable thing about its asset allocation is a focus on the top tech stocks.

Its most significant holding is Apple Inc., accounting for 3.59% of its asset allocation. Microsoft Corp. comes in second, accounting for 3.27% of its asset allocation.

Amazon.com Inc. is its third-largest holding, accounting for 1.86% of its asset allocation.

Vanguard VXC ETF MER And Fees

Vanguard VXC ETF MER And Fees

Vanguard VXC ETF is a low-cost fund. The fund manager takes a passive approach to maintain and rebalance its holdings, relying solely on replicating the performance of the underlying FTSE Global All Cap ex Canada China A Inclusion Index instead of trying to outperform the index.

Such an approach to the portfolio warrants lower expenses. The fund comes with a management fee of just 0.20%. It has a Management Expense Ratio (MER) of 0.21% that accounts for any additional expenses you can expect to bear for owning the fund.

Vanguard VXC ETF Performance And Returns

Vanguard VXC ETF was listed on the TSX on July 7, 2014. It has eight years of past performances to draw from in evaluating the returns it has provided its investors over the years. In the time Vanguard VXC ETF has been around, it has put up a stellar performance.

Vanguard VXC ETF Performance And Returns

The chart above shows the growth of a hypothetical $10,000 invested in VXC ETF since its inception. The chart shows a dip in its performance during the February-March 2020 sell-off, suffered by stock markets worldwide amid a global health crisis.

The fund’s performance has recovered phenomenally since then and has put up stellar growth until the last few months due to various headwinds impacting global equity markets.

Vanguard VXC ETF Performance And Returns 2

The fund’s recent-most performance has been less-than-ideal. At writing, it’s seen a decline of 4.32%, but its losses have been less pronounced than the benchmark index that VXC ETF tracks.

Despite the recent decline, it boasts an impressive 11.73% positive returns in the last five years and 13.82% in the last three.

Vanguard VXC ETF Dividend Yield

As of January 28, 2022, Vanguard VXC ETF’s dividend yield is as follows:

  • 12-month trailing yield: 1.49%
  • Distribution frequency: Quarterly

It means that atop the returns through capital gains on the underlying holdings, investing in VXC ETF also provides you with quarterly dividend payouts averaging 1.49% per year.

Vanguard VXC ETF Alternatives

This section of my Vanguard VXC ETF review will discuss a few alternatives you can compare the fund with.

Considering the top holdings for the fund and the index that VXC ETF tracks, the first name that warrants the most obvious comparison would be iShares XAW ETF, but there are two others you could consider.

Which Is Better – XAW Or VXC?

ishares logo

iShares XAW ETF is the most easily comparable fund to Vanguard VXC ETF. iShares XAW ETF tracks the MSCI ACWI ex Canada IMI Index, net of expenses. Despite tracking a different index, most of its holdings are similar to those of VXC ETF.

iShares XAW is a fund of funds that holds several iShares ETFs, offering significant diversification.

It boasts a slightly higher MER of 0.22% but offers a bigger payout than VXC ETF through a 1.83% 12-month trailing dividend yield. iShares XAW could be considered a viable alternative to VXC ETF.

Vanguard VXC ETF Vs. Vanguard VCN ETF

Vanguard VCN ETF is a fund that tracks the FTSE Canada All-Cap Domestic Index. The fund invests directly or indirectly in small-, mid-, and large-cap stocks of publicly-listed companies in Canada.

VCN ETF is effectively the opposite of VXC ETF, offering you low-cost exposure to the Canadian stock market. You could consider investing in this fund if you want exposure to the domestic stock market in the form of a single investment product.

Vanguard VXC ETF Vs. Vanguard VEE ETF

Vanguard VXC ETF Vs. Vanguard VEE ETF

Vanguard VEE ETF is a fund designed to provide you with investment returns by tracking the performance of a broad emerging market index.

It tracks the FTSE Emerging Markets All Cap China A Inclusion Index, using its assets to directly or indirectly invest in small-, mid-, and large-capitalization stocks of companies in emerging markets countries.

It does not invest in Canadian stocks or any developed market countries, making it more of a pure-play on high-growth emerging market stocks.

How To Buy Vanguard VXC ETF In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

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Conclusion – Is VXC A Good Investment?

It pays to diversify your investment portfolio outside Canada to offset potential losses to your investment returns if there is a significant downturn in the domestic market.

Vanguard VXC ETF offers you the opportunity to substantially diversify your portfolio with exposure to various international markets in emerging and developed countries.

You could consider VXC ETF a good long-term investment for your self-directed portfolio for hands-off and convenient exposure to international equity securities outside Canada.

Check out my detailed iShares XAW ETF review if you are interested in considering an arguably better alternative to Vanguard VXC ETF.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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1 thought on “Vanguard VXC ETF Review 2022: Invest Internationally”

  1. How would you use ZLB in a portfolio of ETF’s . I am rebalancing my portfolio and I am not sure what to do with ZLB. It has performed well over the years so I have kept it although I can not rationalize why as it is not a pure play in any sector.

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