The S&P 500 has gotten off to a shaky start this year, but it's still up 75% over the past five years and looks historically expensive at 30 times earnings. Moreover, most of that rally was driven by a handful of mega-cap tech stocks, such as Nvidia, Microsoft, and Apple, rather than a broader range of stocks.
So if you think U.S. stocks are getting overvalued at these levels, it probably isn't the best time to invest in the popular Vanguard S&P 500 ETF (VOO 1.27%). However, it might be the perfect time to invest in the Vanguard Total International Stock ETF (VXUS 1.62%), which offers broad exposure to overseas markets.
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Why is it the right time to buy VXUS?
VXUS holds a basket of 8,646 stocks and passively tracks the FTSE Global All Cap ex US Index, with a low expense ratio of 0.05%. It allocates 26.8% of its portfolio to emerging markets, 38.2% to Europe, 25.6% to Asia-Pacific, 8.1% to North America, and the rest to other regions. The only three stocks that account for more than 1% of its portfolio are TSMC, Tencent, and ASML.
VXUS has already rallied 9% year-to-date, while the S&P 500 has stayed flat. It could continue rising as more investors diversify their portfolios away from the overheated U.S. market.
