The Vanguard International High Dividend Yield Index Fund ETF Shares has returned 29.6% in 2025, outperforming the S&P 500. European financials and energy giants drove returns, aided by the weakening dollar. The fund’s construction, with a low expense ratio and high dividend yield, contributed to its success. The question now is whether it can repeat this performance in 2026.

International stocks have historically lagged behind U.S. equities, but in 2025, the Vanguard ETF delivered exceptional returns. European stocks benefited from Germany’s fiscal pivot, boosting the fund’s European bank holdings. The weakening dollar amplified gains for U.S. investors. While the fund’s structure and positioning played a key role, risks remain, including concentration in financial services and currency fluctuations.

The fund’s success in 2025 was driven by macroeconomic forces and its construction, including a focus on stable dividend payers. Catalysts for future growth include increased defense spending in Europe and a potential shift in sentiment favoring international dividend stocks. Risks include concentration in financial services and currency volatility that could impact returns for U.S. investors.

Investors are left to ponder whether the Vanguard International High Dividend Yield ETF can replicate its 2025 success in 2026. While the fund offers income, diversification, and stability at a low cost, uncertainties remain, including concentration risk and currency fluctuations. Holding some international exposure can reduce portfolio volatility, but predicting future market performance remains challenging.

Read more at Yahoo Finance: Can the Vanguard International High Dividend Yield Index Fund ETF Shares Outperform Again in 2026?