There's an interesting phenomenon: many people see that international stocks haven't outperformed the S&P 500 over the past 15 years and immediately label related funds as "bad funds." But this is actually a big misconception.

Recently, I’ve been looking at the Vanguard Total International Stock ETF(VXUS), and I found that it’s actually a seriously undervalued product. Many people only look at the return rate and draw conclusions, but they completely fail to understand what the ETF strategy of this fund actually is.

Let's compare. In the U.S. stock market, technology stocks account for about 33%, making them the dominant sector. Financials, consumer discretionary, and communication services are 13%, 11%, and 10%, respectively. But the international market is completely different—financials make up 23%, industrials 15%, and technology only 14%. What does this mean? The international market is more sensitive to economic cycles, and exposure to technology is less than half of that in the U.S. market.

This is why international stocks have performed so poorly over the past decade. The entire era has been centered around technology and AI development, giving U.S. stocks a natural advantage in this area. But it also means that once market sentiment shifts and investors start favoring manufacturing and other cyclical industries, international stocks could lead the way.

Back to VXUS itself. This fund provides exposure to over 8,500 stocks, with a $13.3 billion scale ensuring ample liquidity, and an expense ratio of only 0.05%—almost negligible. From the ETF strategy perspective, it’s designed to offer investors a low-cost, convenient way to access international markets, rather than trying to beat the S&P 500. That’s precisely what a good fund should do.

The problem is that many people evaluate funds only based on relative returns, completely ignoring the fund’s structural design and strategic objectives. It’s like judging a long-distance runner by sprinting standards. If you truly understand the differences between international markets and U.S. stocks, you’ll see why including such assets in your portfolio is necessary. Diversification isn’t just talk; it’s a real risk management need.