VXUS - Beyond VXUS: 3 Reasons To Use Single-Country ETFs Instead
2025-03-04 21:27:30 ET
Summary
- In general, I believe accounts should hold no more than 8 ETFs, with exceptions for fixed maturity bond and single-country equity ETFs.
- Splitting the broad international exposure of VXUS into single-country ETFs offers advantages like tax loss harvesting, more optimal asset location, and excluding exposures better owned elsewhere.
- Here I present a portfolio of 13 Franklin single-country ETFs with a weighted average expense ratio of <12bp and covering 89% of VXUS with notable tax advantages over VXUS.
- More significant than the ~7bp higher expense ratio of this 13 ETF portfolio is whether you have the tax situation, interest, and headspace to enjoy these advantages over VXUS.
One debate I'm often getting pulled into is that over the maximum total number of funds or ETFs one should have in a portfolio. In general, I tend to argue that a large number of investment objectives can be most effectively satisfied with a simple portfolio of no more than 8 ETFs: 3-5 for the core, and for those who really insist on adding some "hot sauce" or "satellite" funds, I tend not to argue against adding a few while keeping the total within 8. This maximum number of funds tends to keep portfolios relatively simple and low cost, both financially and mentally, and very importantly, avoids messy overlaps I often see in portfolios with more funds. The better portfolios I've seen and built with more than 8 positions add those additional exposures through either direct stock or bond positions, or through futures or options. All that said, I make two major exceptions to my "8 fund rule", one for fixed maturity ETFs on the fixed income side, and the other for single-country ETFs on the equity side....
Beyond VXUS: 3 Reasons To Use Single-Country ETFs Instead