Vanguard FTSE All-World ex-US Small-Cap Index Fund ETF Shares (VSS)

ETF Vanguard FTSE All-World ex-US Small-Cap Index Fund ETF Shares (VFMSX)

Profile

Focus: VFMSX tracks the performance of the FTSE Developed ex North America Small Cap Index, aiming to capture the returns of small-cap companies located in developed markets outside of the United States and Canada.

Asset Allocation: The fund primarily invests in small-cap stocks across various sectors and industries in developed markets like Japan, the United Kingdom, Australia, and European countries.

Investment Strategy: VFMSX employs a passive management strategy, closely mimicking the composition of the benchmark index. It uses a full replication method, holding virtually all the securities of the index in the same proportions.

Objective

VFMSX seeks to provide long-term capital growth by offering exposure to a diversified portfolio of small-cap stocks from developed markets excluding North America.

Issuer

Vanguard:

• Reputation: Highly respected investment management firm with a long-standing reputation for low-cost and index-tracking funds.
• Reliability: Strong track record of managing ETFs and mutual funds with billions of dollars in assets under management.
• Management: Experienced and qualified team with expertise in index investing and portfolio management.

Market Share

VFMSX holds a significant market share in the international small-cap equity ETF space. It is one of the largest and most liquid funds in this category.

Total Net Assets

VFMSX has over $10 billion in assets under management.

Moat

• Low fees: VFMSX boasts one of the lowest expense ratios in its category, making it a cost-effective way to access international small-cap exposure.
• Broad diversification: The fund provides broad exposure to a vast selection of small-cap companies across various sectors and developed markets.
• Proven track record: VFMSX has consistently outperformed its benchmark, demonstrating its effectiveness in replicating the index and generating returns.

Financial Performance

• Historical returns: VFMSX has delivered positive long-term returns, outperforming its benchmark index in most periods.
• Volatility: The fund exhibits higher volatility compared to large-cap counterparts but aligns with the inherent volatility of small-cap investments.

Growth Trajectory

Emerging market and international small-cap companies have the potential for strong growth due to their smaller size and higher growth potential. However, they also present higher risk due to geopolitical instability and economic fluctuations.

Liquidity

• Average Trading Volume: VFMSX has a high average trading volume, ensuring easy entry and exit for investors.
• Bid-Ask Spread: The bid-ask spread is typically narrow, indicating low trading costs.

Market Dynamics

• Economic conditions: Global economic growth and stability can impact the performance of small-cap companies.
• Sector performance: The performance of specific sectors within the index can significantly influence the fund's return.
• Currency fluctuations: Currency exchange rates can impact the value of the fund's holdings.

Competitors

• iShares MSCI EAFE Small-Cap ETF (SCZ)
• Schwab International Small-Cap Equity ETF (SCHC)
• SPDR S&P International SmallCap ETF (GWX)

Expense Ratio

The expense ratio for VFMSX is 0.18%, making it one of the lowest-cost options in its category.

Investment Approach and Strategy

• Strategy: Passive index tracking of the FTSE Developed ex North America Small Cap Index.
• Composition: Primarily small-cap stocks across various developed markets excluding North America.

Key Points

• Low cost with broad international small-cap exposure.
• Proven track record of outperforming the benchmark.
• High liquidity and low trading costs.

Risks

• Volatility: Small-cap stocks tend to be more volatile than large-cap counterparts.
• Market risk: The fund is subject to risks associated with emerging markets and international investments.
• Currency risk: Fluctuations in currency exchange rates can impact the value of the fund's holdings.

Who Should Consider Investing

• Investors seeking long-term capital growth and diversification through exposure to international small-cap stocks.
• Investors with a higher risk tolerance who believe in the growth potential of emerging markets.

Fundamental Rating Based on AI

8.5/10

VFMSX receives a high rating based on its low cost, diversified portfolio, proven track record, and liquidity. However, potential investors should carefully consider the inherent volatility and risks associated with small-cap and international investments before making any decision.

Resources and Disclaimers

• Vanguard ETF website: https://investor.vanguard.com/etf/profile/vfmsx/overview
• Morningstar: https://www.morningstar.com/etfs/arcx/vfmsx/quote.html
• FTSE Russell website: https://www.ftserussell.com/products/indices/developed-ex-north-america-small-cap

Disclaimer: This is not financial advice. Please consult with a qualified financial advisor before making any investment decisions.