On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the Vanguard FTSE Emerging Markets ETF (VWO) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF.

Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the newsworthy, trending, and timely exchange-traded funds that we discuss here.

Todd Rosenbluth, great to chat with you again!

Todd Rosenbluth: It’s great to be back, Chuck!

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The Vanguard FTSE Emerging Markets ETF. VWO.

Chuck Jaffe: VWO, the Vanguard FTSE Emerging Markets ETF. It’s not quite the granddaddy of them all, but this is like the original old school — if you’re going to have an ETF that’s going to do something beyond domestic plain vanilla kinds of investing, this was it. So, why this fund back in the spotlight now?

Todd Rosenbluth: You’re right, this is not a new fund; it’s been around for more than a decade. Why I’m highlighting it today is [for]a couple of reasons. One, emerging market ETFs have performed well out of the gate and they’ve been very popular. In the month of January, a record was set of over $20 billion of new net inflows going into emerging market equity ETFs in an individual month.

And then Vanguard made news, as they often do, in January or February, by bringing down the cost of their existing funds. Vanguard cut fees, or the expense ratio, on, I think, more than 50 different funds — mutual funds and ETFs — and VWO was one of them.

So, this broadly diversified, index-based emerging market ETF now costs six basis points. So it’s even cheaper than it was before. It’s even cheaper than the iShares comparable fund for many people.

Chuck Jaffe: Before we talk about the fund — because as you always point out, look, when we start talking about a fund’s returns, they are net of expenses — at times when expenses are a little bit higher, you don’t worry. But one of the interesting things here with expenses is that emerging markets historically has been one of those places where you said, “If I want it represented in my portfolio, I have to be willing to pay a little bit more in expenses to get it.” And obviously, what this fund is proving is that’s not so true anymore.

Todd Rosenbluth: That’s right. So, I mean, Vanguard products typically are below average in their overall fees. I’m looking on Vanguard’s website; they’ve got a statistic that says the average expense ratio of similar funds — and this is including mutual funds — is over 100 basis points. So, the fact that it’s six basis points for VWO is really cheap.

Now, you can find other similar low-cost, broadly diversified emerging market ETFs available. iShares and State Street and Schwab, I believe, also offer examples of products that are taking the largest companies within the Emerging Markets Index, though each of them is constructed a little bit differently. But yeah, if you’re looking for a low-cost fund and you don’t want those fees to eat into your returns, VWO is a great way of doing that.

Chuck Jaffe: The rest of this story has to be about emerging markets now.

Todd Rosenbluth: It is! Emerging markets outperformed in 2025, [though]not as many people paid as much attention to it. That’s why I think we saw emerging market ETFs gather a lot of money in January — because people were catching up. We’ve talked about an overconcentration in U.S. equities, certainly in large-cap U.S. equities and the S&P 500-based ETFs like VOO, which is Vanguard’s product, which remains extremely popular.

But I think investors came into 2026 wanting to diversify, and actually diversify away from U.S. large-caps. So, with emerging markets, you get that diversification from an international perspective, certainly from certain countries. Adding in China, adding in Taiwan, adding in India, which hasn’t performed as well, and South Africa and Brazil — those are the five largest countries within VWO.

But the fundamentals have improved. It’s actually a better place to invest in emerging markets than it’s been. Valuations have been attractive, and the fundamentals, based on the data that I’ve seen, look much stronger than they did before. Certainly, the returns or performance have been much stronger than it was for U.S. equities to start the year.

Chuck Jaffe: Yeah. I mean, emerging markets funds are up more than 5% year-to-date as we record this. But the flip side, when we’re talking about performance and with ETF of the Week, is that frequently you are highlighting active managers these days or you’re looking for something that’s going to give you a performance edge.

And the one thing I will say about VWO — yes, it’s old school. Yes, it has been around a while — but it’s not ever necessarily been — this is the “star” emerging markets fund. Relatively speaking, this has been middle of the pack among emerging markets funds. So obviously, the diversification factor is the big thing you’ve been discussing.

But this is something we don’t talk about a lot. If someone hears you and goes, “Okay, I get the message on emerging markets. Maybe I should go put more money there.” And then they go look at this fund… Doesn’t at some point performance matter if you’re saying “I want an asset class”? Do you just want the representation, or do you say, “Give me the hot player”?

Todd Rosenbluth: Well, I think what people are doing more and more is pairing an index-based approach with an active approach. So the “steady eddy” of broad emerging markets in a low-cost manner — VWO fits that bill. It will give you the exposure; in fact, that’s what it’s intended to do. It’s not trying to outperform anything; it’s trying to replicate a benchmark from FTSE Russell, which is one of the leaders in international equity benchmark strategies.

VWO is trying — and does a good job of replicating — the performance and exposure that you would get from a broadly diversified, emerging markets ETF. Now, there are going to be funds that outperform in a given year and funds that underperform in a given year. And those are likely to bounce back and forth. Many people are looking at the benchmark as their reference point for an active management.

So, I think you could have a low-cost product like VWO as the core of your international equity exposure and also pair it with an actively managed strategy. Have somebody that has more bottom-up stock picking and a narrower universe. Whether that’s an ETF, as I think more people are choosing, or a mutual fund.

But yeah, costs matter, and that 100 basis point difference between the average fund, which is often mutual funds and VWO is going to eat into your returns. So, I like, and I think many people like a broadly diversified, low-cost international strategy to be part of the core. VWO does that very well.

Chuck Jaffe: Because it’s part of the core. And I recognize you do not make individual portfolio recommendations for folks, but given that this is a base emerging markets fund and you might want international exposure to other parts of the world as well, roughly how much of a portfolio — like, what’s a range that is appropriate for this in someone’s portfolio?

Todd Rosenbluth: So, I’m going to back up slightly. Typically, we see people start — they don’t always stay, but start — with a 60% equity, 40% fixed income allocation. Obviously, there are some other asset classes you can fit in there besides stocks and bonds that we’ve talked about.

So, of that 60%, many people have probably two-thirds towards U.S. equities and a third towards international. So, that’s roughly 20% of your portfolio in international equities. And I think that you want a healthy mix of developed and emerging markets split between. So it could be somewhere between 5% and 10% of your portfolio, if you’re willing to take on some risk.

Obviously, emerging markets — the name emerging markets, and an ETF like VWO — is higher risk/high reward than what you would find in a developed market like Europe or a developed U.S. market that people tend to have exposure to. But 5% to 10% is logically a good place to start for your EM equity exposure.

Chuck Jaffe: And if you are looking for more EM exposure, well — the VWO, the FTSE Emerging Markets ETF — a place you might want to look. It’s the ETF of the Week from Todd Rosenbluth. Todd, great stuff as always. Thanks for joining me.

Todd Rosenbluth: It’s a real pleasure, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe. And if you want to hear more of my talk, go to MoneyLifeShow.com or search for us on your favorite podcast app.

Now, if you’re searching for more information on your favorite ETFs, or maybe your next favorite ETFs, the kind of stuff we talk about here, check out VettaFi.com where they’ve got a full suite of tools that will make you a savvier, smarter investor. They’re on X at @Vetta_Fi. Todd Rosenbluth, my guest, their head of research, he’s on X as well. Follow him at @ToddRosenbluth.

The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app. We’ll be back with another ETF for you to consider next week. Until then, happy investing everybody!

Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.

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