Investors seeking global diversification often compare Schwab International Index Fund (SWISX) and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX). Both offer low-cost exposure to international markets but differ significantly in strategy and composition. This in-depth comparison breaks down their differences to help you decide which aligns best with your investment goals.
Understanding the Contenders: SWISX and VTIAX
SWISX is Schwab’s flagship international fund tracking the MSCI EAFE Index. It focuses exclusively on developed markets across Europe, Australasia, and the Far East. With over 900 holdings, it covers large and mid-cap companies in countries like Japan, UK, and Germany.
VTIAX, Vanguard’s offering, follows the FTSE Global All Cap ex US Index. It casts a wider net with over 7,900 holdings spanning both developed and emerging markets, including exposure to China, India, and Brazil alongside European and Pacific nations.
Critical Differences Between SWISX and VTIAX
- Market Coverage: SWISX covers 21 developed countries (0% emerging markets). VTIAX spans 48 countries including 25% emerging market allocation.
- Expense Ratios: SWISX charges 0.06% vs VTIAX’s 0.11% – a 45% cost difference favoring Schwab.
- Holdings Diversification: VTIAX holds 7x more stocks with broader sector and small-cap exposure.
- Dividend Yield: VTIAX historically yields ~3.2% compared to SWISX’s ~2.9% due to emerging market components.
- Minimum Investment: SWISX has no minimum; VTIAX requires $3,000 for Admiral Shares.
Performance and Risk Analysis
Over the past decade, VTIAX’s emerging market exposure has driven higher volatility but also potential for greater returns during growth cycles. SWISX demonstrates more stability with its developed-market focus, underperforming during emerging market rallies but offering smoother downturns. Neither fund hedges currency risk, making both sensitive to USD fluctuations. Since inception, VTIAX has delivered slightly higher annualized returns (7.1% vs 6.4% for SWISX), though past performance doesn’t guarantee future results.
Which Fund Should You Choose?
Consider SWISX if:
- You prioritize ultra-low costs above all else
- Your portfolio already includes separate emerging market exposure
- You prefer reduced volatility from developed markets
- You’re investing through Schwab platforms
Choose VTIAX when:
- You want comprehensive global exposure in one fund
- Emerging market growth potential aligns with your risk tolerance
- Maximum diversification is a priority
- You use Vanguard’s ecosystem
FAQs: SWISX vs VTIAX
Q: Can I hold both funds simultaneously?
A: Yes, but significant overlap in developed markets may create redundancy. Better to pair with specialized EM or small-cap funds.
Q: How do these funds handle currency risk?
A: Both fully expose investors to foreign currency fluctuations – no hedging strategies are employed.
Q: Which has better tax efficiency?
A: VTIAX’s ETF share class (VXUS) offers slightly better tax efficiency. SWISX doesn’t have an ETF equivalent.
Q: Are there transaction fees?
A: SWISX trades fee-free at Schwab. VTIAX has $0 fees at Vanguard but may incur charges elsewhere.
Q: How frequently do these funds rebalance?
A: Both follow index reconstitution schedules – typically quarterly for SWISX and semi-annually for VTIAX.
Final Verdict: SWISX excels for cost-conscious investors satisfied with developed-market exposure, while VTIAX is superior for those seeking true global diversification in a single fund. Your decision should align with existing portfolio composition, risk tolerance, and brokerage ecosystem. Both remain excellent low-cost options for international equity allocation.
