Learn More About Vanguard Total International Stock Index (VGTSX)

If you're considering adding Vanguard Total International Stock Index (VGTSX) to your investment portfolio, here is some basic information about this mutual fund to help you determine whether it is well suited to helping you accomplish your investment goals.

DESCRIPTION

Here is a description of the fund, from the Vanguard Total International Stock Index prospectus:

"The investment seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in Europe, the Pacific region, and emerging markets countries. The Fund employs a "passive management" investment approach designed to track the performance of the Total International Composite Index, which includes the MSCI Europe Index, the MSCI Pacific Index, and the MSCI Emerging Market Index. It invests substantially all assets in the common stocks included in its target index, while employing a form of sampling to reduce risk."

EXPENSE RATIO

One of the most important details about any mutual fund is its expense ratio. The expense ratio tells investors how much of their investment will be lost (annually) to things like management fees and money spent to advertise and promote the mutual fund.

Obviously, the lower the expense ratio, the better.

According to 2008 Investment News data, the average expense ratio for an actively managed mutual fund (meaning the fund manager actively trades the assets in the fund's portfolio) was about 1.25%.

However, some passively managed mutual funds -- for instance, those that attempt to mirror an index, and whose assets are not traded frequently -- have expense ratios as low as about 0.15%.

The expense ratio for Vanguard Total International Stock Index is 0.34%. That's 73% less than the average actively managed mutual fund.

To put that into perspective, if you were to invest $10,000 in Vanguard Total International Stock Index, your annual expenses would be $34 - whereas if you were to invest $10,000 in the average actively managed mutual fund, your annual expenses would be $125.

TOP HOLDINGS

Are you curious which stocks Vanguard Total International Stock Index actually holds?

Here are the top five holdings, in terms of their percentage of total assets:

• NESTLE (1.54%)
• BP PLC (1.49%)
• TOTAL SA (1.25%)
• ROCHE HOLDING AG (1.15%)
• VODAFONE GROUP PLC (1.09%)

HOW THE FUND HAS PERFORMED

Although a mutual fund's past returns do not guarantee future performance, knowing how a fund has fared recently (especially when compared with similar funds) is important information every investor ought to consider when deciding whether to add the fund to his or her portfolio.

In the past year (09/11/2008 - 09/11/2009), Vanguard Total International Stock Index has gained 21.78%.

In comparison, during the same period, the Standard & Poor's 500 index has gained 11.03%.

ANALYSIS

Is Vanguard Total International Stock Index right for your investment portfolio?

That depends on your investment goals.

Morningstar, the investment research firm, classifies Vanguard Total International Stock Index as a "Foreign Large Blend" mutual fund. Here is Morningstar's description of Foreign Large Blend funds:

"Foreign large-blend funds invest in a variety of big international stocks. Most of these funds divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand. These funds typically will have less than 20% of assets invested in U.S. stocks."

Thus, if you're looking for a mutual fund that primarily invests in non-U.S. companies and that offers the stability of large, established companies and the wide exposure of a fund that holds both value and growth stocks, Vanguard Total International Stock Index might be right for you.

DISCLAIMER

The information contained in this overview of Vanguard Total International Stock Index is for information purposes only. It does not constitute, nor should it be interpreted as, legal, financial, or other advice. The mutual fund described above is not being recommended or endorsed, nor is this article making any projections or guarantees about the future returns of the fund or the suitability of any particular investment, security or investment strategy.

If you would like professional advice about mutual fund investment, please contact an independent financial adviser.