Final yr, the Vanguard S&P 500 Development ETF ranked as the most important winner amongst Vanguard’s exchange-traded funds (ETFs). That is not shocking. The ETF owns large stakes in shares like Nvidia, Meta Platforms, Amazon, and Apple, all of which soared in 2024.
Nevertheless, the Vanguard S&P 500 Development ETF is not the very best performer within the Vanguard household to date in 2025. As a substitute, it is an ETF that does not personal a single share in Nvidia, Meta, Amazon, Apple, or another so-called “Magnificent Seven” inventory. In truth, this Vanguard ETF would not maintain any inventory within the S&P 500.
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Look throughout the pond
Which Vanguard ETF am I speaking about? It is the Vanguard FTSE Europe ETF (VGK -0.41%). This fund is up roughly 11% yr up to now, a better return than another Vanguard ETF.
The ETF’s title provides away its focus. The Vanguard FTSE Europe ETF owns solely the shares of corporations based mostly in Europe. It makes an attempt to trace the efficiency of the FTSE Developed Europe All Cap Index, which incorporates corporations situated within the following main European markets: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Eire, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the UK.
This Vanguard ETF at the moment owns 1,269 shares. No single holding makes up greater than 2.43% of the complete portfolio. The ETF’s high 5 positions are German software program firm SAP, Dutch semiconductor-fabrication gear chief ASML Holding NV, Danish drugmaker Novo Nordisk, Swiss meals and beverage firm Nestlé, and Swiss healthcare large Roche Holding AG.
Like all Vanguard ETFs, the Vanguard FTSE Europe ETF is cost-effective for traders to personal. Its annual expense ratio is a low 0.06% in comparison with a median of 0.93% for related funds.
Why is that this Vanguard ETF outperforming to date in 2025?
The Vanguard FTSE Europe ETF has emphatically not been the very best Vanguard fund to personal over the long run. Since its inception on March 4, 2005, the ETF’s common annual return is just 5.14%. The S&P 500 delivered a return roughly 10.7 occasions increased in the course of the interval. Together with dividends helps slim the hole considerably. Nevertheless, the S&P 500’s whole return was nonetheless greater than 3.6 occasions higher than the entire return of the Vanguard FTSE Europe ETF.
The Vanguard FTSE Europe ETF carried out dismally in 2024. Whereas the S&P 500 jumped 23%, this Vanguard ETF declined by almost 2%.
So, what occurred to show issues round this yr? The straightforward reply is that a number of of the European shares within the ETF’s portfolio have began 2025 with a bang.
For instance, SAP’s shares have soared near 17% yr up to now. Roche is not far behind. British-Swedish drugmaker AstraZeneca, Nestlé, Novartis, and British monetary companies large HSBC Holdings, all high 10 holdings for the Vanguard FTSE Europe ETF, have risen by double-digit percentages. Many European shares have risen in current weeks as expectations elevated for a ceasefire in Ukraine.
Is the Vanguard FTSE Europe ETF a no brainer purchase?
Everyone loves a winner. Is the Vanguard FTSE Europe ETF a no brainer purchase? I would not go that far.
It isn’t a nasty thought to diversify your portfolio geographically. When you personal nothing however U.S. shares, including the Vanguard FTSE Europe ETF could possibly be a sensible factor to do.
Nevertheless, understand that simply because this Vanguard ETF is outperforming all different Vanguard ETFs now doesn’t suggest it’ll proceed to take action. A deal to finish hostilities between Russia and Ukraine may fail to materialize. The prospect of steep tariffs imposed by the Trump administration on European imports may additionally derail the momentum of the Vanguard FTSE Europe ETF.
We’re lower than one-sixth of the way in which by way of 2025. Whereas the Vanguard FTSE Europe ETF may ship strong features this yr, I predict different Vanguard ETFs will likely be larger winners earlier than the yr is over.
HSBC Holdings is an promoting associate of Motley Idiot Cash. Randi Zuckerberg, a former director of market improvement and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Keith Speights has positions in Amazon, Apple, and Meta Platforms. The Motley Idiot has positions in and recommends ASML, Amazon, Apple, Meta Platforms, and Nvidia. The Motley Idiot recommends AstraZeneca Plc, HSBC Holdings, Nestlé, Novo Nordisk, and Roche Holding AG. The Motley Idiot has a disclosure coverage.
