International Small Cap Value?

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rattlenap
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International Small Cap Value?

Post by rattlenap » Fri Dec 30, 2016 10:36 pm

Does Vanguard have an international fund for Small Cap Value Stocks?

I know they have the VINEX Vanguard International Explorer Fund, which is for International Small Cap. Yet is it considered small cap value?

lack_ey
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Re: International Small Cap Value?

Post by lack_ey » Fri Dec 30, 2016 10:46 pm

International Explorer is more growth than value.

This category is not common and actually even outside of Vanguard it's a bit hard to target. There are DFA funds but even in ETFs the best options to target that part of the market may be small cap dividend funds.

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Re: International Small Cap Value?

Post by Punta Cana DR » Fri Dec 30, 2016 10:50 pm

Try VSS

kiddoc
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Re: International Small Cap Value?

Post by kiddoc » Fri Dec 30, 2016 10:50 pm

DISVX from DFA is the only fund I know about with reasonable expense ratios in this category. I use the vanguard small cap international ETF: VSS. Not a small value fund strictly.
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triceratop
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Re: International Small Cap Value?

Post by triceratop » Fri Dec 30, 2016 10:54 pm

Punta Cana DR wrote:Try VSS


This is not a Small Cap Value fund; It is a small/mid cap fund.
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brad.clarkston
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Re: International Small Cap Value?

Post by brad.clarkston » Fri Dec 30, 2016 10:57 pm

VSS isn't even overly small-cap'ish. 61% mid-cap and 36 points value so that's what 3% value tilt?

More like mid-cap balanced fund.

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Federal Agent
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Re: International Small Cap Value?

Post by Federal Agent » Fri Dec 30, 2016 11:11 pm

Many use the ETF DLS (WIsdomTree Intern'l Small Dividend Fund) as a reasonable proxy for International small cap value. It's not necessarily the best choice, but I use it since I don't want to pay an advisor for access to DFA.

I hold it in a tax-favored account as I did not want to have" buyer's remorse" if I had bought it in my taxable account and 'voila', a true low-cost international SCV would come along, and then I would be tempted to sell my DLS holdidng and buy the newly issued I-SCV ETF or Index fund.

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Re: International Small Cap Value?

Post by Longtermgrowth » Sat Dec 31, 2016 2:36 am

Federal Agent wrote:Many use the ETF DLS (WIsdomTree Intern'l Small Dividend Fund) as a reasonable proxy for International small cap value. It's not necessarily the best choice, but I use it since I don't want to pay an advisor for access to DFA.

I hold it in a tax-favored account as I did not want to have" buyer's remorse" if I had bought it in my taxable account and 'voila', a true low-cost international SCV would come along, and then I would be tempted to sell my DLS holdidng and buy the newly issued I-SCV ETF or Index fund.


DLS looks interesting. I like your reasoning for keeping it in a tax-favored account. It would have to go in taxable in my case, which brings me to this question: Does anyone know the current percentage of qualified dividends for DLS? I've been looking through the funds site trying to find that information with no success.
I did come across an old thread from 2007, where it was stated that dividends were 100% qualified, though a lot could have changed since then: https://www.bogleheads.org/forum/viewtopic.php?t=1885

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in_reality
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Re: International Small Cap Value?

Post by in_reality » Sat Dec 31, 2016 2:52 am

Longtermgrowth wrote:
Federal Agent wrote:Many use the ETF DLS (WIsdomTree Intern'l Small Dividend Fund) as a reasonable proxy for International small cap value. It's not necessarily the best choice, but I use it since I don't want to pay an advisor for access to DFA.

I hold it in a tax-favored account as I did not want to have" buyer's remorse" if I had bought it in my taxable account and 'voila', a true low-cost international SCV would come along, and then I would be tempted to sell my DLS holdidng and buy the newly issued I-SCV ETF or Index fund.


DLS looks interesting. I like your reasoning for keeping it in a tax-favored account. It would have to go in taxable in my case, which brings me to this question: Does anyone know the current percentage of qualified dividends for DLS? I've been looking through the funds site trying to find that information with no success.
I did come across an old thread from 2007, where it was stated that dividends were 100% qualified, though a lot could have changed since then: https://www.bogleheads.org/forum/viewtopic.php?t=1885


If DLS isn't so tax friendly, FNDC (Schwab Fundamental International Small - i.e. RAFI) has performed very similarly over it's life to date as DLS and DISVX have. Last year the QDI percent was 79.71% and it's current SEC Yield (30 Day)12/30/2016 is 1.83%

It's developed countries only. Not sure if DLS and DISVX include emerging or not...

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Re: International Small Cap Value?

Post by kiddoc » Sat Dec 31, 2016 10:24 am

While we are at it, what do people think about the ishares international small cap etf, SCZ? It's available commission free in my Fidelity account. I haven't been using it as the Morningstar x-ray shows considerable small growth component in it.
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Re: International Small Cap Value?

Post by deeppizza » Sat Dec 31, 2016 10:54 am

I've used Pear Tree Polaris Foreign Value Small Cap (QUSOX) for my international small cap value allocation.

Longtermgrowth
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Re: International Small Cap Value?

Post by Longtermgrowth » Sat Dec 31, 2016 11:02 am

I found 2015 distribution info for DLS on page 4: https://www.wisdomtree.com/-/media/US-Media-Files/Documents/resource-library/pdf/taxsupplements/WisdomTree-2015-Tax-Supplement-Report-2030.ashx

Total Ordinary Dividends: 1.69, Total Qualified Dividends: 1.38... So a hair over 80% QDI for 2015? I'm not sure how foreign taxes withheld plus the huge fund expense ratio effect QDI% when looking at those numbers.

Also, I thought some might find this nearly two year old Cloning DFA article interesting: http://www.etf.com/publications/journalofindexes/joi-articles/24234-cloning-dfa.html?nopaging=1

Towards the end of it they show their clone for DFA Emerging Markets Value (DFEVX) being 60% Vanguard FTSE Emerging Markets (VWO) plus 40% SPDR S&P Emerging Markets Small Cap (EWX).

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Re: International Small Cap Value?

Post by patrick » Sat Dec 31, 2016 11:05 am

in_reality wrote:If DLS isn't so tax friendly, FNDC (Schwab Fundamental International Small - i.e. RAFI) has performed very similarly over it's life to date as DLS and DISVX have. Last year the QDI percent was 79.71% and it's current SEC Yield (30 Day)12/30/2016 is 1.83%

It's developed countries only. Not sure if DLS and DISVX include emerging or not...


DLS and DISVX are both developed only. However, Wisdomtree also offers an emerging markets small cap dividend ETF, DGS, with a 0.63% expense ratio.

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Re: International Small Cap Value?

Post by LibertyLover » Sat Dec 31, 2016 1:08 pm

I was searching for the same type of fund not too long back and got some help here: https://www.bogleheads.org/forum/viewtopic.php?f=1&t=201941&p=3094259#p3094259

To me it came down to two mutual funds (I don't have access to ETFS...But there are equivalents):

SFILX Schwab Fundamental Int Small Company Index
VFSVX Vanguard FTSE All-World ex-US Small Cap Index

VFSVX is slightly more small cap.
SFILX is more valuey.
SFILX has much more of a profitability tilt.

VFSVX has much more allocated to small cap growth which Larry Swedroe had referred to as the black whole of investing (10% compared to 3% for SFILX).

VFSVX includes emerging market; SFILX does not.

I chose SFILX but their is room for debate.

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Re: International Small Cap Value?

Post by grabiner » Sat Dec 31, 2016 4:36 pm

kiddoc wrote:While we are at it, what do people think about the ishares international small cap etf, SCZ? It's available commission free in my Fidelity account. I haven't been using it as the Morningstar x-ray shows considerable small growth component in it.


SCZ is a bit expensive at 0.40%. Even if you have to pay a commission, VSS at 0.17% and SCHC at 0.16% will be less expensive in total cost. (VSS includes emerging markets; none of the other international ETFs do, so you would have to add a separate emerging markets small-cap ETF if you want them, and those are expensive.)
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kiddoc
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Re: International Small Cap Value?

Post by kiddoc » Mon Jan 02, 2017 12:29 am

Thanks grabiner. I'll stick with VSS in my Vanguard account for now. Doesn't look like I can access DLS or the Schwab fund anywhere without commissions (accounts at Vanguard, fidelity, TD Ameritrade). I will re-evaluate once I reach Admiral class at Vanguard or equivalent status at Fidelity.
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cookymonster
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Re: International Small Cap Value?

Post by cookymonster » Mon Jan 02, 2017 1:11 am

VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.

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in_reality
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Re: International Small Cap Value?

Post by in_reality » Mon Jan 02, 2017 1:24 am

cookymonster wrote:VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.


FNDC is the RAFI version (so value tilted) of SCHC and will cost you the same $7. SCHC has the largest spreads of Schwab's market cap weighted ETFs so keep that in mind too. Not really sure on FNDC even though I buy it all the time.

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Re: International Small Cap Value?

Post by sperry8 » Mon Jan 02, 2017 2:07 am

I use SCZ & FNDC. Although SCZ isn't really a value tilt (it's more of a blend with a slight tilt to growth).

For TLH I also use PDN (PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio) http://portfolios.morningstar.com/fund/ ... ture=en-US

The "problem" with VSS is it includes Emerging markets (which the others do not). I prefer to toggle EM separately and that is hard to do when it's rolled up into an ETF.
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Re: International Small Cap Value?

Post by triceratop » Mon Jan 02, 2017 2:23 am

cookymonster wrote:VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.


I have not examined SCHC in detail, but this seems a bit harsher on VSS than my data indicates is needed. For a 15%/6% Fed/State marginal tax bracket investor, with a tax cost of 0.16%, VSS in 2015 was 2bp more efficient than VBR, and only 4bp less efficient than Vanguard Total Stock Market (0.12% tax cost).

Even in a higher tax bracket like 25%/10%, VSS is comparable to VBR in tax cost (0.59% vs. 0.51%) and compares well vs the All-Cap VXUS (0.57%).

Anyway, it's somewhat predictable that SCHC would be more efficient, but this doesn't mean you should opt for SCHC. SCHC is only invested in developed markets small caps and EM equities funds have some of the lowest QDI ratios out there. It isn't the case that SCHC is simply a more efficient investment of the same market segment: you need to decide if the extra diversification is worth the incremental extra cost.
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Re: International Small Cap Value?

Post by cookymonster » Mon Jan 02, 2017 7:06 am

triceratop wrote:
cookymonster wrote:VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.


I have not examined SCHC in detail, but this seems a bit harsher on VSS than my data indicates is needed. For a 15%/6% Fed/State marginal tax bracket investor, with a tax cost of 0.16%, VSS in 2015 was 2bp more efficient than VBR, and only 4bp less efficient than Vanguard Total Stock Market (0.12% tax cost).

Even in a higher tax bracket like 25%/10%, VSS is comparable to VBR in tax cost (0.59% vs. 0.51%) and compares well vs the All-Cap VXUS (0.57%).

Anyway, it's somewhat predictable that SCHC would be more efficient, but this doesn't mean you should opt for SCHC. SCHC is only invested in developed markets small caps and EM equities funds have some of the lowest QDI ratios out there. It isn't the case that SCHC is simply a more efficient investment of the same market segment: you need to decide if the extra diversification is worth the incremental extra cost.

I really appreciate how your spreadsheet analysis of ETFs has allowed me to choose TLH partners, including in International Small Cap.

Here is what I get in this group when I run the numbers for the last 12 months. I run them for a 33% marginal tax rate and 5% tax rate (and 18.8% LTCG). The difference in tax efficiency at that rate between VSS and SCZ is so large that it seems to overcome the difference in ER.

Image

I actually can't find what the "foreign tax paid" for SCHC or other Schwab ETFs is anywhere. So I just averaged it out for the other four and plugged that number in. Let me know if it looks like I'm doing something wrong.

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Re: International Small Cap Value?

Post by in_reality » Mon Jan 02, 2017 8:21 am

cookymonster wrote:
triceratop wrote:
cookymonster wrote:VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.


I have not examined SCHC in detail, but this seems a bit harsher on VSS than my data indicates is needed. For a 15%/6% Fed/State marginal tax bracket investor, with a tax cost of 0.16%, VSS in 2015 was 2bp more efficient than VBR, and only 4bp less efficient than Vanguard Total Stock Market (0.12% tax cost).

Even in a higher tax bracket like 25%/10%, VSS is comparable to VBR in tax cost (0.59% vs. 0.51%) and compares well vs the All-Cap VXUS (0.57%).

Anyway, it's somewhat predictable that SCHC would be more efficient, but this doesn't mean you should opt for SCHC. SCHC is only invested in developed markets small caps and EM equities funds have some of the lowest QDI ratios out there. It isn't the case that SCHC is simply a more efficient investment of the same market segment: you need to decide if the extra diversification is worth the incremental extra cost.

I really appreciate how your spreadsheet analysis of ETFs has allowed me to choose TLH partners, including in International Small Cap.

Here is what I get in this group when I run the numbers for the last 12 months. I run them for a 33% marginal tax rate and 5% tax rate (and 18.8% LTCG). The difference in tax efficiency at that rate between VSS and SCZ is so large that it seems to overcome the difference in ER.

Image

I actually can't find what the "foreign tax paid" for SCHC or other Schwab ETFs is anywhere. So I just averaged it out for the other four and plugged that number in. Let me know if it looks like I'm doing something wrong.

Is it on p49 of the annual report?

http://hosted.rightprospectus.com/docum ... tf_ann.pdf

After federal tax info it lists foreign tax credit and total foreign income. I assume the tax credit is the foreign tax amount paid but that may be naive.

Earlier in the financial statements its list foreign taxes reclaimed but that amount wouldn't be in the foreign tax credit, would it?

The funds may elect to pass on the benefits of the foreign tax credit to its shareholders for the period ended August 31, 2016, and the respective foreign source income on the funds as follows:
A) Schwab International Equity ETF
B) Schwab International Small-Cap Equity ETF
C) Schwab Emerging Markets Equity ETF

Foreign Tax Credit
A) $14,107,274 b) 1,496,293 c) 5,526,469
Foreign Source Income
A) $169,831,242 b) 17,724,097 c)52,300,370

Sorry for the poor formatting -- on my phone.
Last edited by in_reality on Mon Jan 02, 2017 8:44 am, edited 1 time in total.

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cookymonster
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Re: International Small Cap Value?

Post by cookymonster » Mon Jan 02, 2017 8:41 am

in_reality wrote:
cookymonster wrote:
triceratop wrote:
cookymonster wrote:VSS is pretty tax inefficient (horrendous QDI ratio and doesn't pay much in foreign taxes). I would personally go with SCHC in large transactions, even if I were paying $7 transaction fees. Tax efficiency matters a lot more than sales commissions for anyone in high brackets, unless you are investing in a tax-advantaged account.


I have not examined SCHC in detail, but this seems a bit harsher on VSS than my data indicates is needed. For a 15%/6% Fed/State marginal tax bracket investor, with a tax cost of 0.16%, VSS in 2015 was 2bp more efficient than VBR, and only 4bp less efficient than Vanguard Total Stock Market (0.12% tax cost).

Even in a higher tax bracket like 25%/10%, VSS is comparable to VBR in tax cost (0.59% vs. 0.51%) and compares well vs the All-Cap VXUS (0.57%).

Anyway, it's somewhat predictable that SCHC would be more efficient, but this doesn't mean you should opt for SCHC. SCHC is only invested in developed markets small caps and EM equities funds have some of the lowest QDI ratios out there. It isn't the case that SCHC is simply a more efficient investment of the same market segment: you need to decide if the extra diversification is worth the incremental extra cost.

I really appreciate how your spreadsheet analysis of ETFs has allowed me to choose TLH partners, including in International Small Cap.

Here is what I get in this group when I run the numbers for the last 12 months. I run them for a 33% marginal tax rate and 5% tax rate (and 18.8% LTCG). The difference in tax efficiency at that rate between VSS and SCZ is so large that it seems to overcome the difference in ER.

Image

I actually can't find what the "foreign tax paid" for SCHC or other Schwab ETFs is anywhere. So I just averaged it out for the other four and plugged that number in. Let me know if it looks like I'm doing something wrong.

Is it on p49 of the annual report?

http://hosted.rightprospectus.com/docum ... tf_ann.pdf

After federal tax info it lists foreign tax credit and total foreign income. I assume the tax credit is the foreign tax amount paid but that may be naive.

Earlier in the financial statements its list foreign taxes reclaimed but that amount wouldn't be in the foreign tax credit, would it?

Nice find. So I get a foreign tax paid of 19 cents per $10k if that's correct (which makes SCHC look even more favorable).

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Re: International Small Cap Value?

Post by grabiner » Mon Jan 02, 2017 11:07 am

cookymonster wrote:Here is what I get in this group when I run the numbers for the last 12 months. I run them for a 33% marginal tax rate and 5% tax rate (and 18.8% LTCG). The difference in tax efficiency at that rate between VSS and SCZ is so large that it seems to overcome the difference in ER.


However, this is a comparison of apples to a bowl of mixed fruit which is mostly apples. For a fair consideration, you have to add the appropriate fraction of oranges to the other four, say 80% VSS and 20% EEMS/EWX. EEMS and EWX are expensive and have been tax-inefficient.
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Re: International Small Cap Value?

Post by Gemini » Fri Aug 04, 2017 9:59 am

Any updates on Int SCV and EMerging Markets?

I have some cash sitting in a Fido 401K and want to put into above - note sure what funds to use.

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