Vanguard FTSE Developed Markets ETF: A Good Hedge Against The U.S. Market?

If you're worried about U.S. stocks right now, you may want to consider deploying more of your money towards an exchange-traded fund (ETF) that focuses on other parts of the world. One potential option is the Vanguard FTSE Developed Markets Index Fund ETF (NYSE Arca: VEA). As its name suggests, it focuses on developed markets.

The Vanguard fund has nearly 55% of its portfolio allocated to European stocks, followed by 35% in the Pacific and just 10% in North America. It tracks the FTSE Developed All Cap ex US Index. The low-cost fund has an expense ratio of just 0.03%. And since the start of the year, it's up a solid 12% -- that's far better than the S&P 500 's performance, as it's down more than 3% despite its recent rally.

The Vanguard FTSE Developed Market ETF is heavily diversified, with nearly 3,900 stocks in the fund. The largest holding is SAP (NYSE:SAP) but it accounts for just 1.2% of the ETF's overall weight. Other notable names in the ETF include Novartis (NYSE:NVS), AstraZeneca (NASDAQ:AZN), and Shell (NYSE:SHEL).

In addition to diversification, you're also collecting a great yield from this investment as the ETF pays around 3.1%. Between its stability and dividend income, this can make for a great investment to put into your portfolio for the long haul. In five years, the ETF has risen by 54% but when you include its dividend, then its total return is up around 79%. The S&P 500 has done better over that stretch (117% total returns) but that trend may not continue over the next few years, especially if investors are more concerned about U.S. stocks.

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