In the five years to September 2026, VTI returned 12.6% a year and VXUS returned 9.4%, dividends reinvested. These are not really alternatives — most allocation plans hold both. Comparing them asks how much of the gap between US and international stocks is known in advance, and how much is a bet on the last five years continuing.
For a representative saver about twenty years from retirement, investing in a taxable account: On known costs alone, VTI and VXUS come out about even here. VTI's 26.0-point lead in the plan's success rate comes from how the two funds performed over the last five years, so it holds only if those years repeat. For VXUS that tax figure is approximate: the model ignores the foreign tax credit and treats all of its dividend as qualified.
With only the known costs — the same market for both funds, differing by fees and dividend tax — the money lasted in 87.8% of 10,000 simulated futures with VTI and 85.8% with VXUS. Using each fund's own returns from October 2021 to September 2026 instead, the figures were 95.4% and 69.4%. Both funds were run against the identical sequence of market shocks.
Where the gap comes from. Compare the two scenarios above. The known costs are close; almost all of the difference comes from a five-year stretch in which US stocks beat the rest of the world. Holding only VTI is a bet that this continues. Nobody can tell you whether it will.
What this model gets wrong about VXUS. Foreign governments withhold tax on VXUS’s dividends. In a taxable account you can usually claim that back as a foreign tax credit; in an IRA you cannot. Part of VXUS’s dividend is also not "qualified", so it is taxed at a higher rate. The simulation taxes all of it at the qualified rate and ignores the credit. Those two errors pull in opposite directions, and we have not measured which is larger.
VTI tracks the Morningstar US Total Market Index — it holds large, mid and small US companies across the market, weighted by size. VXUS tracks the FTSE Global All Cap ex US Index — it holds companies of every size in developed and emerging markets outside the US.
VTI charges 0.03% a year and yields 1.03%; VXUS charges 0.05% and yields 2.51%.
Returns and volatility are measured from monthly returns with dividends reinvested over 60 months — one sample from one market, and weak evidence for telling two broad funds apart, which is why the known-cost result is reported first. Dividends are taxed at 15% in a taxable account by default, the qualified rate most households pay; the page also shows the 0% and 20% brackets. It is the only tax modeled. A 3.8% net investment income tax can also apply to dividends once modified adjusted gross income passes $200,000 ($250,000 joint); it is not included. Retirement spending is held at 70% of income in today's dollars, and contributions exclude any employer match.
That depends on whether you expect US stocks to keep beating the rest of the world, and no simulation can answer it. What this page can show is that the gap between the two funds comes from recent history, not from their costs.
The foreign tax credit only works in a taxable account, which is a common reason to hold international funds there. The effect is real, but this page does not model it.