Buy 2 Vanguard Index Funds to Beat the S&P 500 in the Next Decade, According to Wall Street Analysts

Core Viewpoint - Goldman Sachs anticipates that European and emerging-market equities will outperform the U.S. stock market over the next decade, with the S&P 500 projected to return 6.5% annually compared to 7.5% for European stocks and 12.8% for emerging-market stocks [1][2]. European Equities - European stocks are expected to achieve a 7.5% annual return, driven by strong earnings growth, a high dividend yield of approximately 3%, and stock buybacks [2]. - The Vanguard FTSE Europe ETF tracks around 1,200 companies in Europe, with significant weight in financials (24%), industrials (19%), and healthcare (13%) [5]. - Over the past decade, the S&P 500 outperformed the Vanguard FTSE Europe ETF, returning 335% (15.8% annually) compared to 174% (10.5% annually) for the European ETF [5][6]. - Analysts believe that European stocks, trading at cheaper valuations, could outperform U.S. stocks due to the historical expense of U.S. equities and a projected decline in the U.S. dollar relative to the euro [6]. Emerging-Market Equities - Emerging-market stocks are projected to return 12.8% annually, bolstered by strong earnings growth in China and India [2]. - The Vanguard FTSE Emerging Markets ETF measures the performance of about 6,200 companies, with a focus on technology (29%), financials (21%), and consumer discretionary (12%) [9]. - The Vanguard FTSE Emerging Markets ETF returned 162% (10.1% annually) over the last decade, significantly lagging behind the S&P 500, which returned 335% [9][10]. - Analysts expect emerging-market stocks to outperform due to stronger earnings growth, higher dividend yields, and a weakening U.S. dollar against emerging-market currencies [10]. Investment Options - The Vanguard FTSE Europe ETF has a low expense ratio of 0.06%, making it a cost-effective option for investors seeking exposure to European equities [8]. - Similarly, the Vanguard FTSE Emerging Markets ETF also features a low expense ratio of 0.06%, which is significantly lower than the average expense ratio of 1.13% for similar funds [11].