One Fund for America, One Fund for Everywhere Else

VTI and VXUS are not really rivals. VTI, the Vanguard Morningstar Total Stock Market ETF, owns almost every publicly traded company in the United States. VXUS, the Vanguard Total International Stock ETF, owns thousands of companies everywhere else, across developed and emerging markets.

Because one holds only US stocks and the other holds only non-US stocks, they have no holdings in common at all. Together, they cover nearly the entire global stock market in two low-cost funds. The real question for most investors is not which one to buy, but how much of each to own.

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This guide is part of FRC’s complete step-by-step guide to investing in ETFs. It compares VTI and VXUS on what they hold, how they behave, what they cost and how they are taxed, so you can decide how they fit your plans.

VTI and VXUS at a Glance

VTI tracks a total US market index that covers large, mid, small and micro-cap US companies, several thousand stocks in all. It launched on 24 May 2001 and is one of the largest ETFs in the world. Its biggest holdings are the giant US technology and growth companies that also dominate the S&P 500.

For most of its life, VTI’s benchmark was called the CRSP US Total Market Index. After Morningstar acquired CRSP’s index business, the indexes were rebranded under the Morningstar name in 2026, and Vanguard renamed the fund the Vanguard Morningstar Total Stock Market ETF. The ticker, the fund’s objective and the way it is managed did not change, so older articles that refer to the CRSP index are describing the same fund.

VXUS tracks the FTSE Global All Cap ex US Index, which covers companies of every size in developed and emerging markets outside the United States. It holds even more stocks than VTI, spread across dozens of countries. It launched on 26 January 2011.

Both funds are passively managed index funds from Vanguard, and both are among the cheapest stock ETFs available. VTI is slightly cheaper, because investing in US stocks costs less than investing across dozens of foreign markets. Both pay dividends quarterly.

The key difference is geography. VTI gives you the US economy; VXUS gives you the rest of the world’s. Owning one without the other means betting that one part of the world will do better than the other.

What VTI Holds

VTI is often described as “the whole US stock market in one fund”. It holds thousands of US companies weighted by market value, so the largest companies have the biggest influence on its returns.

Because the biggest US companies are so large, VTI behaves very much like an S&P 500 fund. The S&P 500’s companies make up the large majority of VTI’s value, and the remaining smaller companies add only a modest amount of extra diversification. FRC’s guide to VOO vs VTI explains how close the two are.

That also means VTI is heavily influenced by a handful of very large technology companies such as Apple, Microsoft, Nvidia, Amazon and Alphabet. Technology is by far its largest sector. When those companies do well, VTI does well, and when they struggle, VTI feels it, even though it owns more than 3,500 other stocks.

What VXUS Holds

VXUS spreads its money across developed markets such as Japan, the United Kingdom, Canada, France, Germany, Switzerland and Australia, and emerging markets such as China, India, Taiwan and Brazil. Developed markets make up most of the fund, with emerging markets a smaller but meaningful share.

In all, VXUS holds around 8,000 or more stocks across more than 40 countries. Its largest holdings include companies such as Taiwan Semiconductor Manufacturing, Samsung Electronics, ASML, Tencent, Nestlé and Novo Nordisk, names many US investors use every day without owning.

Its sector mix looks quite different from VTI’s. Financials are its largest sector, and international markets have a larger share of industrial and materials companies and a smaller share of technology. That means VXUS often performs differently from VTI, which is exactly what makes the two useful together.

VXUS is also less concentrated. Its largest single holdings make up a much smaller share of the fund than VTI’s largest holdings, because no group of companies outside the United States dominates world markets the way the biggest US technology firms do.

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Zero Overlap: Why They Fit Together

Many investors accidentally own the same companies several times over through different funds. VTI and VXUS avoid that problem completely, because their indexes are designed to fit together without overlap.

VTI’s index covers US companies, and VXUS’s index covers everything outside the US. Put them together and you have something very close to the whole global stock market. Vanguard’s Total World Stock ETF, VT, holds essentially the same combination in a single fund.

FRC’s guide on how to check ETF overlap explains why owning several funds is not the same as being diversified. VTI and VXUS are one of the cleanest pairings available precisely because they do not repeat each other.

How They Have Performed Over Time

For much of the period from the end of the global financial crisis to the mid-2020s, US stocks beat international stocks by a wide margin. The giant US technology companies grew enormously, the dollar was strong, and VTI comfortably outpaced VXUS over most of that time.

It has not always been that way. In the 2000s, US stocks had a lost decade: the S&P 500 ended 2009 lower than it started 2000, while international and emerging market stocks did considerably better. In 2025, international stocks again pulled ahead of US stocks, helped by a weaker dollar.

Periods of leadership have tended to last for years, and nobody has been able to predict reliably when they will change. An investor who looked only at the last ten years at the start of 2010 would have concluded international stocks were the better bet, just before a decade in which they lagged badly.

FRC’s guide on the dangers of chasing the best-performing ETFs explains why choosing a fund because of its recent record so often disappoints.

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Risk and Volatility

Both VTI and VXUS are all-stock funds, so both can fall sharply in a market crash. Neither should be held with money you will need in the next few years. FRC’s guide on what happens to your ETF during a stock market crash explains what to expect.

VXUS carries some risks VTI does not. Its emerging market holdings can be more volatile, and they bring political, regulatory and economic risks that differ from those in the United States. Some countries have weaker investor protections or restrictions on foreign investors.

VTI carries its own concentration risk. Because a small number of very large companies drive so much of its value, a sharp fall in those companies can hit VTI hard. Owning VXUS alongside it reduces your dependence on any single group of companies or any single economy.

US and international stocks tend to move in the same direction, with a historical correlation of around 0.8 or more. In a global crash, both usually fall together. The diversification benefit shows up over longer periods, when one region can lead or lag the other for years at a time.

Currency: A Risk and a Diversifier

VXUS holds stocks priced in yen, pounds, euros, Canadian dollars and many other currencies, and it does not hedge them. When the US dollar strengthens, those foreign holdings are worth less in dollars, which drags on VXUS’s returns. When the dollar weakens, the opposite happens.

That adds volatility, but it also adds diversification. A long period of dollar strength helped VTI outperform VXUS, while a weaker dollar has helped international stocks in other periods. For an investor who spends in dollars, foreign currency exposure is an extra source of uncertainty; for an investor who wants protection against a falling dollar, it can be useful.

VTI has no direct currency risk for a US investor. Many of its companies earn a large share of their revenue abroad, though, so a strong or weak dollar still affects their profits indirectly.

Costs

Both funds are very low-cost, with expense ratios of a few hundredths of one percent a year. VXUS costs slightly more than VTI, because trading and holding stocks in dozens of foreign markets is more expensive. On a $10,000 investment, the difference amounts to only a few dollars a year.

Both trade with very tight bid-ask spreads, because they are among the most heavily traded ETFs. FRC’s guide on how ETF fees affect your investment returns explains the costs beyond the expense ratio, including spreads and tracking difference.

Dividends

VXUS has usually paid a higher dividend yield than VTI. Companies outside the United States tend to pay out a larger share of their profits as dividends, while many US companies prefer to buy back shares or reinvest. Both funds pay dividends four times a year.

A higher yield does not mean a better return. Total return, which combines price changes and dividends, is what counts, and VTI’s lower yield has often come with faster price growth. FRC’s guide on why a high ETF dividend yield can be misleading explains why.

VXUS’s dividends can also vary more from quarter to quarter, because many foreign companies pay dividends only once or twice a year, often in the same months. That makes some quarterly payments noticeably larger than others.

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Tax Differences

Almost all of VTI’s dividends are usually qualified dividends, taxed at the lower long-term capital gains rates of 0%, 15% or 20% if you meet the holding period. A noticeably smaller share of VXUS’s dividends qualify, often only around half to two-thirds, because some foreign companies’ dividends do not meet the requirements. The rest is taxed at ordinary income rates.

Foreign governments also tax the dividends VXUS receives. This withholding tax is taken before the money reaches the fund. In a taxable brokerage account, US investors can usually claim a foreign tax credit for it, which offsets part of their US tax bill.

That credit is lost in an IRA or 401(k), because there is no US tax to offset. For that reason, some investors prefer to hold international funds like VXUS in taxable accounts and keep funds like bond ETFs in tax-advantaged accounts.

Others take the opposite view. Because VXUS pays a higher yield and more of it is non-qualified, it creates a bigger annual tax bill in a taxable account than VTI does, and sheltering it in an IRA can outweigh the lost credit for some investors. The right answer depends on your tax bracket and how much space you have in each account. FRC’s guides on how ETFs are taxed in the United States and where to hold ETFs explain the details.

Both funds are very tax-efficient. Vanguard’s ETFs rarely distribute capital gains, so most of the tax you pay comes from dividends and from your own gains when you sell.

How Much International Should You Own?

There is no single right answer, and reasonable investors disagree. The global market-weight approach is to own each region in proportion to its size. US stocks make up roughly 60% of the world’s stock market by value, so a market-weight investor would hold roughly 60% VTI and 40% VXUS.

Many investors hold less international than that. Their spending, income and liabilities are in dollars, they are more familiar with US companies, and US stocks have done well for a long time. Preferring your own country’s stocks is called home bias, and it is common in every country, not only the United States.

A common middle ground is to hold somewhere between 20% and 40% of a stock portfolio in international funds. Vanguard’s own target-date funds hold a substantial share of their stocks internationally, reflecting the view that global diversification reduces risk over long periods.

What matters most is picking a split you understand, writing it down and sticking with it. Changing the mix every time one region has a good year is how investors end up buying high and selling low.

Using VTI and VXUS in a Portfolio

The best-known way to use them together is the three-fund portfolio: a US total stock market fund, an international total stock market fund and a total bond market fund. VTI, VXUS and a bond fund such as BND are a classic combination. FRC’s guide to the three-fund portfolio explains how it works.

Once you have chosen your split, rebalancing keeps it on track. If US stocks surge and VTI grows from 70% to 80% of your stocks, selling some VTI and buying VXUS brings you back to your target. FRC’s guide on how to rebalance an ETF portfolio explains when and how to do it.

VTI and VXUS vs VT

Investors who would rather not manage the split at all can use a single global fund such as VT, the Vanguard Total World Stock ETF. It holds both regions at their market weights, roughly 60% US and 40% international, and rebalances automatically. For simplicity, it is hard to beat.

Holding VTI and VXUS separately has several advantages. You choose your own split, such as 70/30 or 80/20, rather than accepting the market weight. You can place each fund in the account where it is taxed most favourably, and the combined cost is usually a little lower than VT’s.

There is a tax advantage too. VT holds less than half its assets abroad, so it cannot pass the foreign tax credit through to investors, while VXUS can. Separate funds also let you harvest a loss in one region in a taxable account without selling the other.

The trade-off is a little more work. Two funds need rebalancing from time to time, and many investors are tempted to tinker with the split. For an investor who values doing nothing, VT’s simplicity can be worth its slightly higher cost.

VTI vs VXUS vs Similar Funds

VTI has close equivalents from other providers, such as iShares’ ITOT and Schwab’s SCHB, which also cover the whole US market at very low cost. VOO and other S&P 500 funds are close too, holding only the 500 largest companies.

VXUS also has close equivalents, such as iShares’ IXUS. Other international funds cover only part of the picture: VEA holds developed markets only, and VWO holds emerging markets only. Owning VEA and VWO together gives a portfolio similar to VXUS, although the two funds’ indexes treat some countries slightly differently.

The differences between these close equivalents are usually small. The bigger decision is how much you hold in the US and how much abroad, not which provider’s version you choose.

Common Mistakes With VTI and VXUS

Treating them as competitors. Comparing VTI and VXUS as if you must pick a winner misses the point. They cover different parts of the world, and most investors who own one would benefit from deciding deliberately how much of the other to hold.

Abandoning international after a bad stretch. After years of US outperformance, many investors sold their international funds just before international stocks recovered. Strategy based on the recent past is a forecast, not a plan.

Doubling up. Adding VOO or another S&P 500 fund to VTI, or a developed markets fund to VXUS, mostly repeats what you already own. A VTI, VOO and VXUS portfolio is really a VTI and VXUS portfolio with an extra helping of large US companies, adding complexity without adding diversification.

Ignoring account location. Where you hold VXUS decides whether you can claim the foreign tax credit and how much of its dividend income is taxed each year. The difference is not huge, but it adds up over decades, so it is worth deciding deliberately.

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Common Questions

What is the difference between VTI and VXUS? VTI holds almost every US stock, while VXUS holds thousands of stocks from developed and emerging markets outside the United States. They have no overlap, so together they cover nearly the entire global stock market.

Should I buy VTI or VXUS? Most investors do not choose one or the other. They hold both in a split that suits their goals, often with the larger share in VTI. Holding only one means betting on a single region.

Do VTI and VXUS overlap? No. VTI holds only US companies and VXUS holds only non-US companies, so there is no overlap between them.

Is VTI plus VXUS the same as VT? Very nearly. VT, the Vanguard Total World Stock ETF, holds US and international stocks at their market weights in one fund. Holding VTI and VXUS separately lets you choose your own split and place each fund in the most tax-efficient account.

What is a good ratio of VTI to VXUS? Common splits range from about 80% VTI and 20% VXUS to 60% VTI and 40% VXUS, the latter close to the global market weight. The right split depends on your goals and how much international exposure you are comfortable with.

Which has performed better, VTI or VXUS? VTI has outperformed VXUS over most of the period since VXUS launched in 2011. In the 2000s, international stocks did better than US stocks, and leadership between the two has changed several times over the decades.

Does VXUS pay a higher dividend than VTI? Usually, yes. International companies tend to pay out more of their profits as dividends, so VXUS has generally had a higher yield. That does not mean a higher total return.

Should VXUS be held in a taxable account or an IRA? It depends. In a taxable account you can claim a foreign tax credit for the taxes foreign governments withhold, which is lost in an IRA. But VXUS’s higher, less-qualified dividends create more tax each year, so some investors prefer to shelter it in an IRA instead.

Is VXUS riskier than VTI? VXUS carries currency risk and some emerging market risk that VTI does not, but VTI is more concentrated in a small number of very large companies. Both are all-stock funds and can fall sharply in a market crash.

Does VXUS include emerging markets? Yes. VXUS holds both developed and emerging market stocks, including companies from China, India, Taiwan and Brazil, as well as small companies in both groups.

Has VTI changed its name? Yes. In 2026, Vanguard added Morningstar to the names of its US equity index funds after Morningstar rebranded the CRSP indexes they track, so VTI is now the Vanguard Morningstar Total Stock Market ETF. The ticker and the way the fund is managed stayed the same.

What is VXUS? VXUS is the Vanguard Total International Stock ETF. It tracks the FTSE Global All Cap ex US Index and holds thousands of companies of every size in developed and emerging markets outside the United States, making it one of the simplest ways to own international stocks in a single fund.

Is VTI and VXUS a good portfolio? For many long-term investors, yes. Together they cover almost the entire global stock market at very low cost, with no overlap. Adding a bond fund such as BND turns them into the classic three-fund portfolio.

Is VXUS a good investment? VXUS is a low-cost, very broadly diversified fund, and many investors use it to reduce their dependence on the US market. It has lagged US stocks for long stretches, though, and it carries currency and emerging market risk, so it works best as part of a planned allocation rather than a bet on international outperformance.

What is the difference between VXUS and VT? VXUS holds only non-US stocks, while VT holds both US and non-US stocks in one fund, at roughly 60% US and 40% international. VT is effectively VTI and VXUS combined at their market weights.

Your Portfolio Deserves an Educated Investor

VTI and VXUS are two halves of the same idea: owning the global stock market cheaply, broadly and without overlap. The choice that matters is not which one to buy, but how much of each to hold, where to hold them and whether you will stick to your plan when one region runs ahead of the other.

The question isn’t whether financial education costs money. It’s what a lack of it could cost you. FRC’s three progressive ETF programmes take you from how index funds work, through building a balanced global portfolio, to managing currency, tax and concentration risk. FRC’s programmes and memberships are open to everyone, whether you are investing $500 or $500,000.

Invest in understanding the market before investing in the market itself. Know why you hold each fund before the market tests your plan.