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Vanguard FTSE Developed Markets Index Fund ETF Shares

VEA:NYSEArca

equity ETF | passive | Vanguard | Tracks FTSE

Market Price

US$66.08 (26 Jan 2026)

+32.35% (YoY)

NAV

US$65.78

+0.46% Premium

Yield

3.22%

+5.92% (YoY)

Expense Ratio

0.03%

-98% vs Avg: 1.21%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the FTSE Developed All Cap ex US Index, providing broad exposure to large, mid, and small-cap companies in developed markets outside the U.S.. With an ultra-low expense ratio of 0.03% and significant diversification across nearly 4,000 holdings, VEA is a highly efficient and cost-effective option for international equity exposure. The fund's passive management minimizes tracking error, ensuring performance closely aligns with its benchmark. Bull case projects NAV reaching US$79.14 (+20%) while bear case suggests US$52.86 (-20%) over the next 12-18 months.

⚖️ Risk vs Reward

Developed international equities currently trade at a weighted P/E of 17.4x and P/B of 2.0x, appearing reasonably valued compared to historical averages and significantly below stretched valuations seen in some U.S. growth sectors. The asset class has shown strong performance, with a 35.17% market price return over the past year, aligning with broader market enthusiasm for global recovery. However, this positioning carries risks from global economic slowdowns, currency fluctuations against the US dollar, and geopolitical instability in key regions like Europe and Asia. The ETF's broad diversification mitigates single-stock risk, but its unhedged currency exposure introduces volatility. The upside potential is tied to sustained global economic expansion and corporate earnings growth, while the downside is influenced by recessionary pressures and heightened geopolitical tensions.

🚀 Why VEA Could Soar

• Sustained global economic recovery and corporate earnings growth in developed markets ex-US could drive a 15-20% upside in underlying stock valuations over 12-18 months.
• Potential for continued weakening of the US dollar against major international currencies could provide an additional 5-10% boost to unhedged foreign equity returns.
• Developed markets ex-US currently offer more attractive valuations (P/E 17.4x) compared to the US, potentially attracting increased capital flows and leading to multiple expansion of 10-15%.

⚠️ What Could Go Wrong

• A global economic slowdown or recession leading to a 15-20% contraction in corporate earnings across developed markets could impact stock prices.
• Strengthening US dollar, driven by safe-haven demand or higher US interest rates, could create a 5-10% headwind for unhedged international equity returns.
• Geopolitical instability in key regions such as Europe or Asia could trigger investor uncertainty, leading to capital outflows from international markets and a 15-20% market correction.

🏢 Fund Overview

What Are You Actually Buying

VEA offers comprehensive exposure to developed international equity markets, excluding the United States. This includes approximately 3,853 common stocks from large, mid, and small-cap companies across 24 countries, primarily in Europe, Canada, and the Pacific region.
The ETF targets well-established economies with mature companies, often characterized by stable growth, robust corporate governance, and developed financial infrastructures. This exposure diversifies portfolios away from purely U.S.-centric investments.
Companies within this segment span all major sectors, including Financial Services, Industrials, Technology, and Healthcare, representing a broad cross-section of global commerce and innovation outside the U.S.
Unlike some competitors, VEA includes stocks from Canada and South Korea, providing broader regional diversification within the developed market mandate.

Market Dynamics & Outlook

Developed international markets are experiencing a post-pandemic recovery, though the pace varies by region, influenced by inflation, interest rates, and consumer spending patterns.
Valuations (P/E 17.4x) in these markets are generally more attractive than in the U.S., potentially offering a margin of safety and upside if economic growth remains resilient.
Currency fluctuations against the U.S. dollar remain a key factor, as the fund does not hedge currency risk, leading to potential impacts on returns for U.S. investors.
Geopolitical tensions, particularly in Europe and Asia, could introduce volatility, though resilient corporate earnings and global trade remain supportive tailwinds.

🎯 Why This Matters

Understanding VEA's developed markets ex-U.S. exposure is crucial for U.S. investors seeking global diversification. These markets offer distinct economic cycles and valuation characteristics compared to the U.S., but also come with unique geopolitical and currency risks that can influence overall portfolio performance.

📈 Valuation & Analysis

Historical Performance

YTD

+5.30%

+35.17%

Yearly Growth (3Y)

+18.04%

Yearly Growth (5Y)

+9.21%

Yearly Growth (10Y)

+8.75%

Yearly Growth (Since Inception)

+4.37%

Current Valuation

The Vanguard FTSE Developed Markets Index Fund ETF (VEA) currently holds a portfolio with an aggregate price-to-earnings (P/E) ratio of 17.4x and a price-to-book (P/B) ratio of 2.0x, as of December 31, 2025. These metrics suggest that the underlying developed market equities outside the U.S. are trading at a reasonable valuation. The ETF's trailing 12-month (TTM) dividend yield stands at 3.22%. Historically, developed international markets can trade at a discount to U.S. equities, reflecting different growth profiles and market dynamics. The current P/E of 17.4x is below the 5-year average for global equities, indicating that the market is not overly stretched despite recent performance gains. This valuation offers a potentially attractive entry point for long-term investors seeking diversified international exposure, balancing growth potential with a focus on established economies.

The Bull Case - Upside to

Strong Global Economic Rebound

Medium Probability

If global GDP growth outperforms expectations by 1-2% in 2026, driven by resilient consumer spending and corporate investment, underlying earnings for VEA's holdings could increase by an additional 10-15%, potentially pushing the NAV to US$79.14 (+20%).

Favorable Currency Movements

Medium Probability

A sustained depreciation of the US dollar against major developed market currencies (e.g., Euro, Yen, Pound) by 5-10% could translate into an additional 5-10% gain for VEA's unhedged returns for US investors, contributing to an NAV of US$75.98 (+15%).

Attractive Valuations Drive Inflows

Probability

The current relative undervaluation of developed ex-US equities (P/E 17.4x vs. US market) could attract significant capital inflows from global investors seeking value, leading to a 10-15% multiple expansion and an NAV of US$77.06 (+16%).

The Bear Case - Downside to

Global Recession and Earnings Contraction

Medium Probability

A deeper-than-expected global recession leading to a 15-20% contraction in corporate earnings across VEA's holdings could cause the NAV to decline to US$52.86 (-20%), as economic activity falters.

U.S. Dollar Strength

Medium Probability

A resurgence in U.S. dollar strength, driven by persistent inflation or flight-to-safety dynamics, could impose a 5-10% drag on VEA's returns for U.S. investors, pushing the NAV down to US$59.20 (-10%).

Increased Geopolitical Instability

Probability

Escalation of geopolitical conflicts in key regions (e.g., Eastern Europe, East Asia) could lead to significant market uncertainty and capital flight, resulting in a 15-20% drawdown in international equity values, leading to an NAV of US$56.06 (-15%).

Risk/Reward Assessment

The risk-reward profile for VEA appears balanced, with potential upside driven by a continued global economic rebound and attractive relative valuations, potentially pushing NAV to US$79.14 (+20%). However, significant downside risks persist, particularly from a global recession or a stronger U.S. dollar, which could see NAV fall to US$52.86 (-20%). The fund's broad diversification helps cushion against idiosyncratic stock risks, but the unhedged currency exposure means U.S. investors must consider currency volatility. Investors in VEA are essentially making a bet on the long-term growth and stability of developed economies outside the U.S. The current valuation suggests a reasonable entry point, but macro-economic headwinds or geopolitical shocks could temper returns. The blend of growth opportunities and inherent international market risks defines the investment proposition for this core international equity ETF.

Peer Comparison

VEA stands out among its peers primarily due to its ultra-low expense ratio of 0.03%, making it one of the most cost-effective ways to access developed international markets. Its extensive diversification across nearly 4,000 holdings, including Canadian and South Korean stocks, offers broader exposure than many competitors. The fund's large asset base also ensures excellent liquidity and minimal bid-ask spreads, benefiting efficient trading. While its performance generally aligns with category averages, its cost efficiency is a significant long-term advantage, though investors should note its unhedged currency exposure can introduce additional volatility compared to hedged alternatives.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) ⭐	3.00%	US$193.3B	35.17%	18.04%	9.21%	3.22%
iShares Core MSCI EAFE ETF (IEFA)	7.00%	US$115.0B	27.60%	13.00%	7.00%	3.30%
Schwab International Equity ETF (SCHF)	3.00%	US$42.0B	30.00%	15.00%	8.00%	2.90%
SPDR Portfolio Developed World ex-US ETF (SPDW)	3.00%	US$28.0B	30.50%	14.50%	7.50%	3.10%

🎯 Why This Matters

The valuation and peer analysis confirm VEA as a highly cost-effective and broadly diversified option for accessing developed international markets. Its strong historical performance and low expense ratio make it a compelling choice for core international equity allocation, but investors must acknowledge the inherent currency and geopolitical risks of unhedged international exposure.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	ASML	A	ASML Holding NV	Technology	1.5%
2	005930	S	Samsung Electronics Co Ltd	Technology	1.4%
3	ROG	R	Roche Holding AG	Healthcare	1.0%
4	AZN	A	AstraZeneca PLC	Healthcare	1.0%
5	HSBA	H	HSBC Holdings PLC	Financials	0.9%
6	NOVN	N	Novartis AG Registered Shares	Healthcare	0.9%
7	NESN	N	Nestle SA	Consumer Defensive	0.9%
8	SAP	S	SAP SE	Technology	0.9%
9	000660	S	SK Hynix Inc	Technology	0.9%
10	RY	R	Royal Bank of Canada	Financials	0.8%

Fund Mechanics

How It Works

The Vanguard FTSE Developed Markets Index Fund ETF employs a passive, full-replication indexing strategy, aiming to precisely track the performance of the FTSE Developed All Cap ex US Index. This index is a market-capitalization-weighted benchmark comprising approximately 3,853 common stocks of large, mid, and small-cap companies located across 24 developed markets outside the United States. Key regions include Canada, Europe, and the Pacific. The fund's objective is to hold each stock in approximately the same proportion as its weighting in the index, minimizing tracking error. The index methodology involves sorting companies by free-float-adjusted market capitalization and targeting firms within the top 98% of this group, with buffers to manage turnover. The portfolio is reconstituted semi-annually in March and September. This approach ensures broad diversification and cost efficiency by avoiding active management fees and high trading costs typically associated with stock picking. The fund's unhedged currency exposure means its returns for U.S. investors are also influenced by fluctuations in foreign exchange rates.

Holdings Breakdown

Number of Holdings

3853

Top 10 Concentration

1000.0%

Top 20 Concentration

1800.0%

Turnover Rate

290%

Category	Weight	Description
Financial Services	24.1%
Industrials	18.6%
Technology	11.6%
Healthcare	9.2%
Consumer Cyclical	8.9%
Basic Materials	7.2%
Consumer Defensive	6.1%
Energy	4.4%
Communication Services	3.8%
Utilities	3.2%
Real Estate	2.9%

Cost Efficiency

Expense Ratio

0.03%

Median Bid-Ask Spread

0.330%

Metric	1 Year	3 Year	5 Year
Tracking Error	N/A	N/A	N/A
Tracking Difference	24.00%	-9.00%	0.00%

Expense Ratio History

Year	Expense Ratio
2025	0.03%
2024	0.03%
2023	0.03%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	35.17%	34.86%	0.31%	N/A	N/A	N/A
2024	3.10%	3.36%	-0.26%	N/A	N/A	N/A
2023	18.01%	17.96%	0.05%	N/A	N/A	N/A
2022	-15.39%	-15.58%	0.19%	N/A	N/A	N/A
2021	11.66%	11.58%	0.08%	N/A	N/A	N/A
2020	9.81%	10.00%	-0.19%	N/A	N/A	N/A
2019	22.60%	22.34%	0.26%	N/A	N/A	N/A
2018	-14.81%	-14.79%	-0.02%	N/A	N/A	N/A
2017	26.50%	26.31%	0.19%	N/A	N/A	N/A
2016	2.67%	2.29%	0.38%	N/A	N/A	N/A

Annualized Return Since Inception

4.37%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VEA ⭐	Vanguard FTSE Developed Markets Index Fund ETF Shares	Vanguard	3.00%	US$193.3B	35.2%	18.0%	9.2%	3.22%	17.97%	N/A	0.330%
IEFA	iShares Core MSCI EAFE ETF	BlackRock iShares	7.00%	US$115.0B	27.6%	13.0%	7.0%	3.30%	18.00%	N/A	0.040%
SCHF	Schwab International Equity ETF	Charles Schwab	3.00%	US$42.0B	30.0%	15.0%	8.0%	2.90%	17.50%	N/A	0.030%
Category Average			1.21%	—	29.4%	15.3%	8.0%	3.14%	—	N/A	—

Risk Metrics

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	17.97%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	N/A	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	-33.47%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

23,056,160

Avg Daily Dollar Volume

US$1523.6M

Trend

increasing

Bid-Ask Spread

Metric	Value
Median (Percent)	33.000%
Median (Dollar)	US$0.22
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	0.00%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

stable

Net Flows

Period	Net Flow
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.