Question about International Funds on Schwab

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jimmyrules712
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Question about International Funds on Schwab

Post by jimmyrules712 »

I have my Roth IRA through Schwab and I'm thinking about using that account for my international allocation (and using my 401k for my domestic funds).

The Schwab international index fund (SWISX, expense .19%) looks good enough, except it appears to not include emerging markets or international small caps.

The best emerging markets index fund I can find on Schwab with no transaction fee is Northern Emerging Markets Equity Index Fund (NOEMX, exp .72%).

Do you all think that a combination of those 2 funds would do work well to represent a portfolio's entire international allocation? I know this strategy would not include international small caps but I don't see a no transaction fee fund on schwab for that.

If so, what ratio between the 2 funds would you use for an aggressive portfolio (24 year old).
vesalius
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Post by vesalius »

How about Schwab Fundamental International Small-Mid Company Index Fund (SFILX) and Schwab Fundamental Emerging Markets Index Fund (SFENX) as options?
YDNAL
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Re: Question about International Funds on Schwab

Post by YDNAL »

jimmyrules712 wrote:I have my Roth IRA through Schwab and I'm thinking about using that account for my international allocation (and using my 401k for my domestic funds).
Jimmy,

Why would you use Schwab (Roth IRA) and jump through hoops trying to get international exposure - to fall short at the end anyways?
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
jimmyrules712
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Joined: Thu Jan 06, 2011 10:36 pm

Re: Question about International Funds on Schwab

Post by jimmyrules712 »

YDNAL wrote:
jimmyrules712 wrote:I have my Roth IRA through Schwab and I'm thinking about using that account for my international allocation (and using my 401k for my domestic funds).
Jimmy,

Why would you use Schwab (Roth IRA) and jump through hoops trying to get international exposure - to fall short at the end anyways?
I have 2 accounts, a Roth 401k and a Roth IRA. I assumed it wouldn't make a difference between the 2 where I put the international alloc. What do you recomend?

I don't know what you mean by "to fall short at the end anyways". Please explain?
vesalius wrote:How about Schwab Fundamental International Small-Mid Company Index Fund and Schwab Fundamental Emerging Markets Index Fund as options?
I'll look at those...for some reason they didn't turn up by the fund finder on the Schwab site, ha!
YDNAL
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Re: Question about International Funds on Schwab

Post by YDNAL »

jimmyrules712 wrote:
YDNAL wrote:
jimmyrules712 wrote:I have my Roth IRA through Schwab and I'm thinking about using that account for my international allocation (and using my 401k for my domestic funds).
Jimmy,

Why would you use Schwab (Roth IRA) and jump through hoops trying to get international exposure - to fall short at the end anyways?
I have 2 accounts, a Roth 401k and a Roth IRA. I assumed it wouldn't make a difference between the 2 where I put the international alloc. What do you recomend?
Jimmy,

I made an observation/question.... you don't need to have Schwab as the custodian for your Roth if they don't have what you want/need.

My suggestion... transfer to Vanguard and get Total International.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
jimmyrules712
Posts: 640
Joined: Thu Jan 06, 2011 10:36 pm

Re: Question about International Funds on Schwab

Post by jimmyrules712 »

YDNAL wrote:
jimmyrules712 wrote:
YDNAL wrote:
jimmyrules712 wrote:I have my Roth IRA through Schwab and I'm thinking about using that account for my international allocation (and using my 401k for my domestic funds).
Jimmy,

Why would you use Schwab (Roth IRA) and jump through hoops trying to get international exposure - to fall short at the end anyways?
I have 2 accounts, a Roth 401k and a Roth IRA. I assumed it wouldn't make a difference between the 2 where I put the international alloc. What do you recomend?
Jimmy,

I made an observation/question.... you don't need to have Schwab as the custodian for your Roth if they don't have what you want/need.

My suggestion... transfer to Vanguard and get Total International.
I see, well that leads me to ask another question. My Roth 401k is on vanguard (and has the total int stock fund). If I want to just use vanguard for everything is there any reason to not just increase my contribution to the roth 401k (currently only 2.25% of salary) and just not even contribute to the roth IRA account anymore?

The Roth 401k account has access to Institutional shares for most of the funds (although only investor shares for the total internaitonal one) which have lower expense ratios than the funds I would have access to if I moved my Roth IRA there.
montesquieu
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Post by montesquieu »

There are also three no-trade-commission international equity ETFs at Schwab.

SCHF: Schwab International Equity ETF (expense ratio: 0.13%); this is cheaper and more diversified than the Schwab International Index fund.

SCHC: Schwab International Small-Cap Equity ETF (expense ratio: 0.35%)

SCHE: Schwab Emerging Markets Equity ETF (expense ratio: 0.25%)

These don't overlap and would be reasonable choices (with all the necessary caveats about ETFs in general and the rather new Schwab ETFs in particular).
cliffedelgado
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Re: Question about International Funds on Schwab

Post by cliffedelgado »

jimmyrules712 wrote: I see, well that leads me to ask another question. My Roth 401k is on vanguard (and has the total int stock fund). If I want to just use vanguard for everything is there any reason to not just increase my contribution to the roth 401k (currently only 2.25% of salary) and just not even contribute to the roth IRA account anymore?
Not advocating one or the other here. Just pointing out a difference. It should be easier to get your contribution out of the Roth IRA compared to the Roth 401k in case you ever needed to do that. Your contributions to Roth 401k plan can be withdrawn according to the IRS, but I'm guessing some plans may not even offer the option, or may hinder your ability to do so with restrictions.
YDNAL
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Re: Question about International Funds on Schwab

Post by YDNAL »

jimmyrules712 wrote:
YDNAL wrote:Jimmy,

I made an observation/question.... you don't need to have Schwab as the custodian for your Roth if they don't have what you want/need.

My suggestion... transfer to Vanguard and get Total International.
I see, well that leads me to ask another question. My Roth 401k is on vanguard (and has the total int stock fund). If I want to just use vanguard for everything is there any reason to not just increase my contribution to the roth 401k (currently only 2.25% of salary) and just not even contribute to the roth IRA account anymore?

The Roth 401k account has access to Institutional shares for most of the funds (although only investor shares for the total internaitonal one) which have lower expense ratios than the funds I would have access to if I moved my Roth IRA there.
Well, if you selected Roth 401K - I have to assume that you are in a very low tax bracket - then it may make sense to put all your current savings there, with the added assumption that you have available to you everything you want/need for your asset allocation.

You see, all of these assumptions are largely eliminated if you follow posting guidelines (link).
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
difflch
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Post by difflch »

I use SCHF & SCHC for my international allocation.

I am very happy with no commission, low expense ratios, and simple allocation to two funds for a total international exposure with small tilt.
e5116
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Post by e5116 »

I'd recommend using SCHF and SCHE. Just as good as Vanguard's VEU as long as you're comfortable with placing a limit order for ETFs. A 75/25 ratio of SCHF to SCHE sounds good to me. That weighted expense ratio is cheaper than Vanguard as well. (Not saying that Vanguard is a poor choice, but Schwab is fine for international as well. No need to jump through hoops to transfer the funds). If you want small-cap exposure, SCHC would be a fine addition but I don't think it'll make a huge addition at this point in your investing life. If you do choose to have small-cap exposure, maybe a 65/20/15 SCHF/SCHE/SCHC would work. That'd be great international exposure at a very low cost as long as you don't mind holding three funds (I personally don't find it to be that big of a deal as there's no overlap and you can control your desired percentages, but others hate added complication).

The Schwab fundamental index funds are fine too, but note that they follow the RAFI indices and have really high gross expense ratios (you only pay the net expense ratios, but it's important to know the possible upper limit), so Schwab could increase the fees at any time if they so desire. Although since it's a Roth, you can get out of them without any tax ramifications at least, so it wouldn't be too terrible to choose though. Still, my preference would be the lower cost commission-free Schwab ETFs.
cheapskate
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Post by cheapskate »

e5116 wrote: The Schwab fundamental index funds are fine too, but note that they follow the RAFI indices and have really high gross expense ratios (you only pay the net expense ratios, but it's important to know the possible upper limit), so Schwab could increase the fees at any time if they so desire. Although since it's a Roth, you can get out of them without any tax ramifications at least, so it wouldn't be too terrible to choose though. Still, my preference would be the lower cost commission-free Schwab ETFs.
Below is the fine print on the Expense Ratios for the Schwab RAFI funds. While Schwab can raise the ERs, it would require a termination and approval (by the board of trustees) of a new agreement. Not that it can't happen, but at least they can't raise it easily anytime they want. More important, the increasing competition coming to market this year (eg Russell One World ETFs and other offerings), should hopefully put downward pressure on ERs.

"2. Schwab and the investment adviser have agreed to limit the fund's "net operating expenses" as stated in the prospectus for each fund, for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. The limitation excludes interest, taxes, expenses for dividends and interest paid on securities sold short, and certain non-routine expenses, which may result in a fund incurring net operating expenses above the limitation".

Disclaimer : I don't own the Schwab RAFI funds, but following them with some interest.
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