Many of the world's top companies are headquartered in the U.S., but there are plenty of worthwhile companies across the globe. That's why it's helpful to invest in international stocks to achieve a truly diversified portfolio.
My preferred way to invest in international companies is through an international ETF, such as the Vanguard Total International Stock ETF (VXUS 1.99%). If you're interested in investing in an international ETF and considering VXUS, here's one thing you should know.
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When you invest in VXUS, you're investing in nearly 8,700 companies from both developed and emerging markets. That's worth noting, because each of those markets has its own pros and cons.
Developed markets are those with more mature economies and infrastructure, meaning those companies tend to be more reliable, but the upside can be modest. Emerging markets are those with developing economies and industrialization, meaning companies in these markets tend to be more volatile, but there are often more growth opportunities as their economies modernize.
Of course, this is a broad generalization, and there are exceptions. However, that's the general risk-reward trade-off investors can expect with these two segments. Investing in VXUS allows you to have the best of both worlds while hedging the downsides of each market.
