The Vanguard FTSE Developed Markets ETF (VEA) Offers Broader Diversification Than the SPDR Portfolio Developed World ex-US ETF (SPDW)

Both the SPDR Portfolio Developed World ex-US ETF(NYSEMKT:SPDW) and the Vanguard FTSE Developed Markets ETF(NYSEMKT:VEA) aim to give investors wide exposure to developed international equities, excluding the U.S. While SPDW tracks the S&P Developed Ex-U.S. BMI Index, VEA follows the FTSE Developed All Cap ex US Index. Here’s how they compare on cost, performance, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; figures use five-year weekly returns.

Both funds are equally affordable with a 0.03% expense ratio, but VEA edges out SPDW with a slightly higher dividend yield—2.7% compared to 2.6%, which may appeal to income-focused investors.

Performance & risk comparison

What's inside

The Vanguard FTSE Developed Markets ETF holds about 3,873 stocks with a fund age of 18.3 years, tracking the FTSE Developed All Cap ex US Index. The fund is diversified across Financial Services (24%), Industrials (19%), and Technology (11%). Top positions include ASML Holdngs (NASDAQ:ASML), Samsung Electronics Co Ltd (OTC:SSNL.F), and Sap Se (NYSE:SAP), each at about 0.01% of assets, reflecting a very broad approach without heavy concentration. No notable quirks or overlays are present.

SPDW, by contrast, covers 2,405 holdings and features a similar sector tilt: Financial Services at 23%, Industrials at 19%, and Technology at 10% (as reported in the base_sector_blurb). Its largest positions are Nestle(OTC:NSRGY), Toyota Motor(NYSE:TM), and Novartis(NYSE:NOV), each also at about 0.01%. VEA’s larger asset base and broader stock count could appeal to those seeking maximum diversification.

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Foolish take

The Vanguard FTSE Developed Markets ETF tracks the FTSE Developed All Cap ex U.S. index. The SPDR Portfolio Developed World ex-US ETF tracks the S&P Developed Ex-U.S. BMI index.

Despite tracking different indexes, the performance investors have seen from these two ETFs is nearly identical and disappointing. The Vanguard FTSE Developed Markets ETF is up by 60.3% over the past 10 years. The SPDR Portfolio Developed World ex-US ETF has performed slightly better with a gain of 61.3% over the same period.

If we include dividends received over the past decade, the Vanguard FTSE Developed Markets ETF has produced a 115.6% total return. On this metric, the SPDR Portfolio Developed World ex-US ETF slightly underperformed the Vanguard FTSE Developed Markets ETF with a 10-year total return of 114.4%. To put their lack of performance in perspective, investors who bought the Vanguard 500 Index Fund ETF realized a 291% total return over the past decade.

Glossary

ETF: Exchange-Traded Fund, a fund that trades on stock exchanges and holds a basket of assets.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund divided by its share price, expressed as a percentage.
Beta: A measure of a fund's volatility compared to the overall market; 1.0 means equal volatility.
AUM: Assets Under Management; the total market value of assets a fund manages for investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a period.
Index (as in 'tracks an index'): A benchmark representing a group of securities; funds track indexes to mirror their performance.
Diversification: Spreading investments across many assets to reduce risk.
Sector tilt: The fund’s allocation preference toward certain industries or sectors compared to the broader market.
Holdings: The individual stocks or assets owned by a fund.
Developed markets: Countries with advanced economies and established financial systems, such as Japan, UK, and Germany.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Vanguard FTSE Developed Markets ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Nestlé. The Motley Fool has a disclosure policy.