This Vanguard Fund Invests in Non-U.S. Stocks and Is Up 8% This Year

If you're worried about the U.S. economy or simply want a way to diversify your portfolio, you may want to look at investing in companies based in other parts of the world. It can be a good way to balance out some of your risk, both in the short term and the long term.

And one exchange-traded fund (ETF) that has been doing well this year is the Vanguard FTSE All-World ex-US Index Fund ETF (NYSEMKT: VEU). Here's why this can be a good investment to put into your portfolio right now.

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^SPX data by YCharts

It's a low-cost fund with thousands of stocks

Vanguard funds are attractive options for investors because they often come with incredibly low fees, making them ideal options for the long term. Minimizing fees is important to ensure that your returns are high, and the Vanguard FTSE All-World ex-US ETF charges an expense ratio of just 0.04%.

Another appealing feature of the ETF is that it contains thousands of stocks -- more than 3,800 holdings in total, with a median market cap of $48 billion. Investors get a good mix of stocks within the fund without being overly exposed to any single company. The largest holding in the fund is Taiwan Semiconductor Manufacturing, which accounts for less than 3% of the ETF's total holdings. And most stocks make up less than 1% of the fund's weight.

The downside of too much diversification is that it can result in underwhelming returns, especially when it's only certain sectors of the market that are performing well.

But you'll primarily be interested in the fund for its low cost and diversification, as it can provide you with some excellent long-term stability. More than 41% of its holdings are European stocks, 26% in emerging markets, and another 25% are in the Pacific region.

The fund provides good value for investors

Another thing investors will like about this ETF is that it averages a modest price-to-earnings multiple of less than 16. The compares favorably against the S&P 500 (SNPINDEX: ^GSPC), which is at a P/E of 23. While the S&P 500 index may contain more growth-focused stocks and has provided investors with better returns over the years, amid a downturn, investors may flock to more value-oriented investments. This is why the FTSE All-World ex-US Index could make for an attractive option to consider.

^SPX data by YCharts

Historically, there's no denying it has underperformed the S&P 500. But the past doesn't predict the future, and by focusing on stocks outside the U.S., investors can better protect their portfolios amid volatile conditions. And with the fund outperforming the S&P 500 in the early part of this year, that could be a sign that investors are already beginning to pivot toward safer investments, particularly to those outside of the U.S. market.

Yet another incentive for buying this ETF is for its dividend, which yields over 3% -- that's far higher than the S&P 500 average of 1.4%.

Having a diverse portfolio can be more important than ever

It's not easy to predict where the market may be headed these days, as the threat of tariffs and trade wars is looming over global economies. That makes it crucial for investors to hedge and minimize their portfolio's risk however they can.

And one option is to diversify, not just to ensure you have exposure to multiple sectors, but also to different parts of the world, which is where the Vanguard FTSE All-World ex-US ETF comes into play. It may not generate massive returns due to how diverse it is, but it can a good investment to hang on to for the sake of reducing your overall risk.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.