This is a passive ETF that tracks the FTSE Developed Europe All Cap Index, holding developed European stocks from large caps to small caps on a market-cap-weighted basis. It is broadly diversified across companies in major countries such as the UK, France, Germany and Switzerland.

It suits long-term investors who want to reduce their weighting in the US market and diversify across developed Europe in a single holding.

It is an ETF managed by Vanguard using a passive (index-tracking) approach.

The fund holds the constituents of the developed Europe index broadly, in proportion to their market capitalization, so it tracks the performance of the European equity market as a whole. It is widely diversified to avoid concentration in any single stock or country, and rebalancing is reflected periodically in line with index rules.

• Diversification across the full market-cap range, covering large, mid and small caps
• Core European exposure at a low expense level

Assets under management (AUM) stand at $29.5B, and the total expense ratio is 0.06% per year.

Because it focuses on a single region, Europe, its regional concentration is greater than that of global developed-market ETFs, and it is exposed to fluctuations in European currencies such as the euro and the pound.

The fund moves in line with European equities, and in the short term it tends to show volatility depending on the European economy, monetary policy and global risk appetite. Its correlation with the US market is somewhat lower, so a diversification benefit can be expected.

Fund flows have been fairly steady, driven by demand for non-US diversification, and the ETF is used as a tool for adjusting the European weighting from a global asset allocation perspective. Changes in the relative valuation of Europe versus the US influence fund flows.

Its strengths are a low expense ratio and broad European diversification, while its main drawbacks are single-region concentration and currency exposure.

The three funds shown in the table, VEA, IEFA and EFA, are ETFs that widen exposure to global developed markets including Europe, while VXUS and VT diversify even more broadly by including emerging markets. If you want narrower exposure within Europe, you can also consider ETFs such as FEZ, which holds only the eurozone, EWU, which focuses on the UK, and EWG, which focuses on Germany.

Here are the points to review before investing in VGK. It is a core vehicle for gaining developed European exposure in one step, but it is wise to check regional concentration, currency fluctuations and top sector weightings against your own portfolio before buying.

A slowdown in the European economy and currency fluctuations are the main drivers of short-term volatility. Because the fund is concentrated in a single region, it is directly exposed to negative news from Europe, and it may also underperform the US market for an extended period.

It is a core vehicle suited to long-term investors who want to gain developed European exposure in one step at a low expense ratio. If you want broader developed-market diversification, consider ETFs such as VEA and IEFA, and if you want to include emerging markets, consider ETFs such as VXUS and VT.