The Vanguard VIU ETF or FTSE Developed All Cap ex North America Index ETF, seeks to track the performance of a global equity index that focuses on providing exposure to developed markets, excluding the U.S. and Canada stocks.
It invests primarily in large, mid, and small-cap stocks outside Canada and the U.S.
This Vanguard ETF seeks to track the FTSE Developed All Cap ex North America Index using cost-effective and efficient index management techniques to align with investing goals. VIU ETF has investments in more than 3,800 stocks currently.
Pros of Vanguard VIU ETF
- Provides exposure to the developed equity markets globally.
- Uses cost-effective index management techniques.
- Facilitates passive investing.
- It seeks long-term capital growth.
- Provides a better diversification versus its iShares counterpart, XEF.
Cons of Vanguard VIU ETF
- Despite international exposure, the ETF does not provide exposure to emerging markets.
- Heavy weightage on the top three sectors, making up nearly 50% of the ETF’s total assets.
- It is not suitable for investors looking for a steady source of income from their investment.
Vanguard VIU ETF Facts
- Inception Date: December 1, 2015
- Benchmark: FTSE Developed All Cap ex North America Index
- Net Assets: $2,335M
- MER: 0.22%
- Distribution Yield: 2.18%
- Dividend Schedule: Quarterly
Vanguard VIU ETF MER – Management Expense Ratio
VIU has a management fee of 0.20% and a MER of 0.22%. Management fee and expense ratio are similar to its Ishares counterpart XEF.
The MER is what Vanguard takes to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing on your own.
Mutual funds can charge over 2% and it robs you of your returns. It’s time to ditch your mutual funds and switch to ETF ASAP. Many brokers such as Questrade offer free ETFs. Couple the free ETFs with low MER and you are ahead of many.
Vanguard VIU ETF Performance
Vanguard VIU has underperformed the SP500 (VFV ETF) index but outperformed the TSX in the past 5 years.
As it stands, it has a total return since inception of 6.98% which is not great from a long term perspective considering my portfolio is doing over 10% annually since 2009.
Why complicate your portfolio? Stick to the S&P500 conglomerates that operate around the world already and support all the industries in those regions.
What’s the performance you should seak? All indexes are average, don’t just diversify for the sake of diversifying.
Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. The growth is ultimately a factor of your investment performance provided you make your TFSA contribution limit every year. The annual performance of an ETF matters as you can see below the growth over 20+ years.
| wdt_ID | Year | Yearly Limit | Cumulative | 5% Growth | 10% Growth | Dividend Earner | Spousal |
|---|---|---|---|---|---|---|---|
| 1 | 2009 | 5,000 | 5,000 | 5,250 | 5,500 | Not Tracked | Not Started |
| 2 | 2010 | 5,000 | 10,000 | 10,762 | 11,550 | Not Tracked | Not Started |
| 3 | 2011 | 5,000 | 15,000 | 16,550 | 18,205 | Not Tracked | Not Started |
| 4 | 2012 | 5,000 | 20,000 | 22,628 | 25,525 | Not Tracked | Not Started |
| 5 | 2013 | 5,500 | 25,500 | 29,534 | 34,128 | $41,742 | Not Started |
| 6 | 2014 | 5,500 | 31,000 | 36,786 | 43,590 | $52,820 | Not Started |
| 7 | 2015 | 10,000 | 41,000 | 49,125 | 58,949 | $56,307 | Not Started |
| 8 | 2016 | 5,500 | 46,500 | 57,356 | 70,984 | $70,200 | Not Started |
| 9 | 2017 | 5,500 | 52,000 | 65,999 | 84,034 | $78,900 | $13,308 |
| 10 | 2018 | 5,500 | 57,500 | 75,074 | 98,487 | $96,937 | $58,818 |
| 11 | 2019 | 6,000 | 63,500 | 85,128 | 114,986 | $129,467 | $82,596 |
| 12 | 2020 | 6,000 | 69,500 | 95,684 | 133,030 | $153,993 | $95,906 |
| 13 | 2021 | 6,000 | 75,500 | 106,769 | 152,933 | $181,601 | $113,194 |
| 14 | 2022 | 6,000 | 81,500 | 118,407 | 174,827 | $183,031 | $144,633 |
| 15 | 2023 | 6,500 | 88,000 | 131,152 | 199,459 | $217,738 YTD | $167,963 YTD |
| 16 | 2024 | 7,000 | 95,000 | 145,061 | 227,105 | ||
| 17 | 2025 | 7,000 | 102,000 | 159,664 | 257,516 | ||
| 18 | 2026 | 7,000 | 109,000 | 174,997 | 290,967 | ||
| 19 | 2027 | 7,000 | 116,000 | 191,097 | 327,764 | ||
| 20 | 2028 | 7,500 | 123,500 | 208,526 | 368,791 | ||
| 21 | 2029 | 7,500 | 131,000 | 226,828 | 413,920 | ||
| 22 | 2030 | 7,500 | 138,500 | 246,044 | 463,562 | ||
| 23 | 2031 | 7,500 | 146,000 | 266,221 | 518,168 | ||
| 24 | 2032 | 7,500 | 153,500 | 287,407 | 578,235 | ||
| 25 | 2033 | 7,500 | 161,000 | 309,653 | 644,308 | ||
| 26 | 2034 | 7,500 | 168,500 | 333,011 | 716,989 | ||
| 27 | 2035 | 7,500 | 176,000 | 357,536 | 796,938 | ||
| 28 | 2036 | 7,500 | 183,500 | 383,288 | 884,881 | ||
| 29 | 2037 | 7,500 | 191,000 | 410,327 | 981,620 | ||
| 30 | 2038 | 7,500 | 198,500 | 438,719 | 1,088,032 |
Vanguard VIU ETF Holdings
Below are some of the VIU ETF holdings at the time of writing. The portfolio asset mix may be reconstituted and rebalanced at the discretion of the sub-advisor from time to time.
VIU ETF invests 100% in equities. The ETF has more than 70% exposure to large-cap funds, followed by ~13% in medium-cap funds, and ~7% in small-cap funds. The balance allocation is in medium-large and medium/small-cap funds.
Some of its major stock holdings are Nestle, Samsung, ASML, Roche Holding, Toyota Motor, LVMH, Novartis, SAP, etc.
VIU is geographically diversified with large exposure to Europe (~60% of fund allocation), and the Pacific (~40%). Prominent countries of investment include Japan, UK, France, Germany, Switzerland, Australia, South Korea, Sweden, Netherlands, and Hong Kong.
| wdt_ID | Sector | Ratio |
|---|---|---|
| 1 | Financials | 16.40 |
| 2 | Utilities | 3.10 |
| 3 | Communication Services | 3.30 |
| 4 | Consumer Cyclical | 15.40 |
| 5 | Energy | 3.30 |
| 6 | Basic Materials | 7.20 |
| 7 | ||
| 8 | Industrials | 17.50 |
| 9 | Consumer Defensive | 8.50 |
| 10 | Real Estate | 4.00 |
| 11 | Cash | 0.25 |
| 12 | Technology | 10.00 |
| 13 | Healthcare | 11.10 |
Why hold Vanguard VIU ETF
VIU is an ideal ETF for investors seeking long-term capital growth, are planning to hold the investment for the medium to long term, and are comfortable with a medium level of risk.
This ETF provides a decent dividend and also offers good diversification in case of market volatility. This ETF is a good way to achieve international diversification, in developed markets, for Canadian investors who are looking at investing away from their home market.
As a Canadian investor, we hear that we need to diversify and holding VIU will accomplish that but it may impact your performance. Consider that the S&P500 companies are all operating in those countries and countributing to those economies.
Globalization along with mergers & acquisitions has changed how we could see diversification today. I vote to stick with an S&P500 ETF such as VFV.
If you want the dividends, it’s not clear you will get the same growth but the the best banks and the best utility stocks will give you more income.