International diversification is a cornerstone of smart investing, and ETFs like SWISX and VXUS offer efficient exposure to global markets. Both track broad international indexes but differ significantly in scope, structure, and strategy. This comprehensive comparison breaks down their key features to help you decide which aligns best with your investment goals.
What is SWISX?
The Schwab International Index Fund (SWISX) is a low-cost mutual fund tracking the MSCI EAFE Index. This index covers large and mid-cap stocks across 21 developed markets outside North America, including Europe, Australasia, and Japan.
- Issuer: Charles Schwab
- Expense Ratio: 0.06%
- Holdings: ~1,400 companies
- Market Focus: Exclusively developed markets
- Structure: Mutual fund (priced end-of-day)
- Dividends: Quarterly distributions
What is VXUS?
The Vanguard Total International Stock ETF (VXUS) tracks the FTSE Global All Cap ex US Index. It provides comprehensive exposure to over 8,500 stocks across developed and emerging markets worldwide, covering all market capitalizations.
- Issuer: Vanguard
- Expense Ratio: 0.07%
- Holdings: ~8,500 companies
- Market Focus: 75% developed, 25% emerging markets
- Structure: ETF (trades intraday)
- Dividends: Quarterly distributions
Key Differences: SWISX vs VXUS
- Market Coverage: SWISX excludes emerging markets and small-caps; VXUS includes both.
- Diversification: VXUS holds 6x more stocks with broader sector representation.
- Emerging Markets: VXUS has ~25% allocation (e.g., Taiwan, India, Brazil); SWISX has 0%.
- Accessibility: SWISX requires a Schwab brokerage account; VXUS trades on any platform.
- Cost Efficiency: SWISX’s 0.06% ER slightly edges VXUS’s 0.07%, but both are ultra-low.
- Tax Efficiency: VXUS’s ETF structure offers potential tax advantages over SWISX’s mutual fund format.
Which Should You Choose?
Consider SWISX if:
- You use Schwab and prefer mutual funds
- You want pure developed-market exposure
- You’re avoiding emerging market volatility
Consider VXUS if:
- You seek true global diversification (including EM)
- You prioritize maximum holdings diversity
- You value ETF flexibility and tax efficiency
- You invest outside Schwab platforms
For most investors, VXUS’s comprehensive coverage provides superior diversification. However, SWISX remains compelling for Schwab users focused solely on developed markets.
Frequently Asked Questions (FAQ)
Q: Does SWISX include Canadian stocks?
A: No. Both exclude North America, focusing on international markets only.
Q: Can I hold both SWISX and VXUS together?
A: It’s generally redundant as VXUS already includes SWISX’s coverage. Better to pair with a US fund like VTI.
Q: Which has performed better historically?
A: VXUS often outperforms long-term due to emerging market growth, but SWISX may lead during EM downturns. Past performance ≠ future results.
Q: Are these funds currency-hedged?
A: No. Both expose investors to foreign currency fluctuations.
Q: How do dividends compare?
A: Both yield 3-4% historically. VXUS may have slightly higher dividends due to EM holdings.
Q: Which is better for retirement accounts?
A: Both work well in IRAs. SWISX’s mutual fund structure poses no tax disadvantage in tax-advantaged accounts.
Ultimately, SWISX offers targeted developed-market access at minimal cost, while VXUS delivers unparalleled global diversification. Your choice should align with your risk tolerance, brokerage preferences, and view on emerging markets. Both remain excellent low-cost options for international allocation.
