Comparing Two Developed Markets ETF Options: A Closer Look at VEA and SPDW for International Equity Exposure

Understanding the Contenders

Investors seeking exposure to developed markets outside the United States have numerous options, but two funds frequently dominate the conversation: the Vanguard FTSE Developed Markets ETF (VEA) and the SPDR Portfolio Developed World ex-US ETF (SPDW). Both provide broad access to established international economies, yet they operate under different index methodologies—VEA tracks the FTSE Developed All Cap ex US Index, while SPDW follows the S&P Developed Ex-U.S. BMI Index. Understanding their differences can help investors make a more informed decision.

Cost and Scale: Where They Stand

When examining the expense ratio—a critical factor for long-term investors—both funds are tied at 0.03%, making them equally cost-efficient. However, a closer inspection reveals subtle advantages:

VEA’s higher dividend yield of 2.7% versus SPDW’s 2.6% offers a modest edge for income-seeking investors. More significantly, VEA’s substantially larger AUM of $250.8 billion compared to SPDW’s $32.0 billion suggests greater liquidity and institutional confidence.

Portfolio Composition: Width vs. Concentration

The two funds take notably different approaches to diversification within developed markets. VEA maintains approximately 3,873 holdings with an 18.3-year track record, distributing capital across Financial Services (24%), Industrials (19%), and Technology (11%). Its largest positions—ASML Holdings, Samsung Electronics, and SAP—each represent roughly 0.01% of assets, reflecting a deliberate emphasis on minimal concentration risk.

SPDW, by contrast, holds 2,405 securities with a comparable sector allocation: Financial Services (23%), Industrials (19%), and Technology (10%). Its top holdings include Nestlé, Toyota Motor, and Novartis, similarly weighted at approximately 0.01% each. The critical distinction lies in the sheer breadth of VEA’s stock count, which may provide investors seeking maximum diversification a measurably wider net across international markets.

Risk and Return Analysis

Over a five-year period, both funds exhibited similar downside vulnerability:

While the performance gap is minimal, VEA’s slightly lower maximum drawdown and superior growth trajectory suggest marginally better risk-adjusted returns, though the difference is modest enough to be largely immaterial for most investors.

Long-Term Performance: The Bigger Picture

When zooming out to a decade-long perspective, the picture becomes more nuanced. The Vanguard FTSE Developed Markets ETF appreciated 60.3% over the past ten years, compared to SPDW’s 61.3% gain. However, once dividend income is factored in, VEA delivered a 115.6% total return, slightly outpacing SPDW’s 114.4% cumulative return.

Despite these gains, both developed markets ETF options have lagged domestic U.S. equity performance substantially. The Vanguard 500 Index Fund ETF generated a 291% total return over the same decade, underscoring the significant performance gap between U.S. and international developed market equities during this period.

The Investment Decision

For investors prioritizing diversification and yield, the Vanguard FTSE Developed Markets ETF presents a compelling case. Its broader holdings, larger asset base, and marginally higher income distribution offer meaningful advantages, particularly for those constructing a globally balanced portfolio. The equivalent expense ratio eliminates cost as a differentiator, shifting focus to the qualitative benefits of greater breadth and scale that VEA provides within the developed markets ETF category.