Help: Vanguard Total International Stock Market vs. Schwab International Index

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bennettg
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Help: Vanguard Total International Stock Market vs. Schwab International Index

Post by bennettg » Fri May 05, 2017 2:24 pm

Hi....I've been on the boards for a while now and have learned much and am becoming more self sufficient, but wanted to ask for help on one issue.

I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.

My goal is to approximate the VG Target Date 2035, in which VGTSX is a component. Schwab has SWISX, but I learned that The it is based on the MSCI EAFE index, which does not include emerging market stocks, Canadian stocks, and which has minimal exposure to international small cap stocks.

What products do folks who own SWISX use to better approximate VGTSX (perferably from schwab or from the one source)?

Thanks
Last edited by bennettg on Sat May 06, 2017 6:35 am, edited 1 time in total.

e5116
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Re: VGTSX vs SWISX

Post by e5116 » Fri May 05, 2017 2:31 pm

Unfortunately, Schwab doesn't have a market-weighted emerging markets index fund. Your best bet if you really want to avoid ETFs is SFENX (Schwab Fundamental Emerging Markets Large Company Index Fund), although its expense ratio at 0.39% is a bit higher (but maybe you prefer the factor loadings of the fundamental index). Similarly, you could add SFILX (Fundamental International Small Cap) if you want that exposure. I personally suck it up and stick with ETFs SCHF, SCHE and SCHC at Schwab for my international exposure. I do prefer the simplicity of index mutual funds, but it isn't a huge deal to me to make the ETF orders.

gkaplan
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Re: VGTSX vs SWISX

Post by gkaplan » Fri May 05, 2017 8:54 pm

OP, you might get more responses if you edit your thread title to include the fund names for the tickers.
Gordon

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backpacker
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Re: VGTSX vs SWISX

Post by backpacker » Fri May 05, 2017 8:59 pm

bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.

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bennettg
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Re: VGTSX vs SWISX

Post by bennettg » Sat May 06, 2017 6:35 am

gkaplan wrote:OP, you might get more responses if you edit your thread title to include the fund names for the tickers.
Updated, thanks.

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bennettg
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Re: VGTSX vs SWISX

Post by bennettg » Sat May 06, 2017 6:37 am

backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.

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backpacker
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Re: VGTSX vs SWISX

Post by backpacker » Sat May 06, 2017 7:12 am

bennettg wrote:
backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.

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in_reality
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Re: VGTSX vs SWISX

Post by in_reality » Sat May 06, 2017 7:58 am

bennettg wrote:
backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
ETFs are really the way to go at Schwab.

If you believe in value tilting or are willing to do so for that part of your international holdings, Schwab does have some good international mutual funds (SFENX - Emerging 0.39% ER, SFILX International Small 0.39% ER).

I'm not here to argue whether or not the value premium can overcome their slightly higher cost. These funds are probably your best options to get small developed international and emerging market exposure via mutual funds available at Schwab. Other one source funds have a higher ER.

If you look at SFENX, it's returned about the same ($90 more on a $10k investment) as VEMAX over it's life (about 9 years). SFILX has done better ($5k more on a $10k investment over about 8 years) than VSS (Vanguard International Small). SFENX dropped a lot in 2015 and I think you have to be prepared for periods of underperformance with these (and all value) funds.

Small value is a kind of popular tilt on the forum and FNDC which is the ETF version of SFILX which is a popular choice for small international value (partly due to a lack of other options).

SFENX and SFILX are also the mutual fund versions of the ETFs that Schwab uses in it's intelligent portfolios.

SFENX's largest holding is S.Korea 18.52% and SFILX's third largest holding is Canada 8.18% so you'd get some of your missing exposure. I thought they followed a FTSE index which includes S.Korea as developed but anyway there it is in emerging.

I use the ETFs versions for my international holdings.

Otherwise, the new Schwab Target Index funds have a rock bottom ER and might be an option too. They are a mutual fund that holds ETFs - no small international though and they phase out emerging at retirement (to reduce volatility I imagine). Not the Target Date fund - the Target Index funds with the 0.08% ER [it was 0.13% but someone said it got all reduced to the institutional price].

rob65
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Re: Help: Vanguard Total International Stock Market vs. Schwab International Index

Post by rob65 » Sat May 06, 2017 8:04 am

Here's a minority viewpoint on this board. I think Schwab is right. The default international option should be developed markets with emerging an add-on for those that want it. Emerging has potentially more reward, but carries significant risk.

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bennettg
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Re: VGTSX vs SWISX

Post by bennettg » Sat May 06, 2017 8:21 am

backpacker wrote:
bennettg wrote:
backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?

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in_reality
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Re: VGTSX vs SWISX

Post by in_reality » Sat May 06, 2017 8:53 am

bennettg wrote:
backpacker wrote:
bennettg wrote:
backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
To see what market cap weighting of the Schwab ETFs would be, there is a simple calculator here. (it pulls data from Morningstar so sometimes has trouble loading when M* is refreshing pages). I don't see a reason to use Vanguard ETFs at Schwab.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Target Index Funds are here: https://www.schwabfunds.com/secure/file/P-9430864

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backpacker
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Re: VGTSX vs SWISX

Post by backpacker » Sat May 06, 2017 8:59 am

bennettg wrote:
backpacker wrote:
bennettg wrote:
backpacker wrote:
bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
That makes sense. The way I'm thinking about it, you have a couple really good options.

Option 1: Just use Schwab index funds. You can use their total domestic fund (SWTSX) and their international fund (SWISX). Sure, the international fund lacks emerging markets and small cap international stocks but, in practice, it behaves almost exactly the same as Vanguard's international fund that includes them. You can see the similarity in the chart below. I don't think the difference is worth worrying much about.

Image

Option 2: Have your contributions auto deposited into Schwab's total bond fund SWAGX every two weeks. Then, at least once a year, use the money in the fund to buy the 2035 Schwab target date fund (SWXFX). The purchase should be commission free. This keeps your total number of funds to a minimum. Your bond allocation will creep up over the course of the year, but that's no big deal. You can always send money from your bond fund to the target date fund more frequently if you want.

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bennettg
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Re: VGTSX vs SWISX

Post by bennettg » Sun May 07, 2017 8:08 am

in_reality wrote:
bennettg wrote:
backpacker wrote:
bennettg wrote:
backpacker wrote:
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
To see what market cap weighting of the Schwab ETFs would be, there is a simple calculator here. (it pulls data from Morningstar so sometimes has trouble loading when M* is refreshing pages). I don't see a reason to use Vanguard ETFs at Schwab.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Target Index Funds are here: https://www.schwabfunds.com/secure/file/P-9430864
Thank you. This is very helpful. Can I ask another question.....?

If I were to buy a Schwab Target Index fund (as mentioned in some other posts), is there a resource that would allow me to compare the expense ratio of the target index fund with what I would pay by buying the underlying funds/etfs in the same proportions? I understand that it may be more tax efficient to own the underlying funds, but also wonder if it is cheaper? Does schwab charge for the 'simplicity' of the target index fund ?

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in_reality
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Re: VGTSX vs SWISX

Post by in_reality » Sun May 07, 2017 9:08 am

bennettg wrote:
in_reality wrote:
bennettg wrote:
backpacker wrote:
bennettg wrote:
Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible.
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
To see what market cap weighting of the Schwab ETFs would be, there is a simple calculator here. (it pulls data from Morningstar so sometimes has trouble loading when M* is refreshing pages). I don't see a reason to use Vanguard ETFs at Schwab.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Target Index Funds are here: https://www.schwabfunds.com/secure/file/P-9430864
Thank you. This is very helpful. Can I ask another question.....?

If I were to buy a Schwab Target Index fund (as mentioned in some other posts), is there a resource that would allow me to compare the expense ratio of the target index fund with what I would pay by buying the underlying funds/etfs in the same proportions? I understand that it may be more tax efficient to own the underlying funds, but also wonder if it is cheaper? Does schwab charge for the 'simplicity' of the target index fund ?
A rough estimate is that it costs about 0.035% more. The Target Index funds are 0.08% and a three fund ETF portfolio is about 0.045 (depending on you allocation).

They also have some allocation to cash which functions as a zero duration bond in their way of thinking and is part of fixed income overall, but others say it's an opportunity for Schwab to loan out that money through their bank and only pay you part of what they get (based on average rates that are published someplace).

I think it's worth it because if you are like most, you'll probably want to tweak your allocation, and might not keep in balance.

The funds were originally 0.13% but everything was moved to the institutional price of 0.08%. Not sure why but it's really cheap.

You can do an exact comparison if you want...

You've got a number of great options here including VXUS. You are lucky to have such a good plan.

Topic Author
bennettg
Posts: 71
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Re: VGTSX vs SWISX

Post by bennettg » Sun May 07, 2017 9:25 am

in_reality wrote:
bennettg wrote:
in_reality wrote:
bennettg wrote:
backpacker wrote:
Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just different share classes of the very same funds. You have the same thing either way. For my own part, I would definitely put up with using ETFs to get Vanguard's better coverage of international markets and substantially lower fees.
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
To see what market cap weighting of the Schwab ETFs would be, there is a simple calculator here. (it pulls data from Morningstar so sometimes has trouble loading when M* is refreshing pages). I don't see a reason to use Vanguard ETFs at Schwab.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Target Index Funds are here: https://www.schwabfunds.com/secure/file/P-9430864
Thank you. This is very helpful. Can I ask another question.....?

If I were to buy a Schwab Target Index fund (as mentioned in some other posts), is there a resource that would allow me to compare the expense ratio of the target index fund with what I would pay by buying the underlying funds/etfs in the same proportions? I understand that it may be more tax efficient to own the underlying funds, but also wonder if it is cheaper? Does schwab charge for the 'simplicity' of the target index fund ?
A rough estimate is that it costs about 0.035% more. The Target Index funds are 0.08% and a three fund ETF portfolio is about 0.045 (depending on you allocation).

They also have some allocation to cash which functions as a zero duration bond in their way of thinking and is part of fixed income overall, but others say it's an opportunity for Schwab to loan out that money through their bank and only pay you part of what they get (based on average rates that are published someplace).

I think it's worth it because if you are like most, you'll probably want to tweak your allocation, and might not keep in balance.

The funds were originally 0.13% but everything was moved to the institutional price of 0.08%. Not sure why but it's really cheap.

You can do an exact comparison if you want...

You've got a number of great options here including VXUS. You are lucky to have such a good plan.
Thank you once again. What tool did you use to get your rough estimate? I'm hoping to learn so I can do for myself.

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in_reality
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Re: VGTSX vs SWISX

Post by in_reality » Sun May 07, 2017 9:44 am

bennettg wrote:
in_reality wrote:
bennettg wrote:
in_reality wrote:
bennettg wrote:
Thank you for your response. It costs $4.95 to buy a Vanguard ETF at Schwab. I am paid every two weeks and have monies taken out and sent to my retirement plan. If you buy schwab funds, there is no charge, so you can buy what you want every two weeks. But if I were to buy Vanguard ETFs at schwab, at what frequency does it become cost-prohibitive? In other words, if my goal was to have a 3 fund VG portoflio, how frequently should I buy each ETF?
To see what market cap weighting of the Schwab ETFs would be, there is a simple calculator here. (it pulls data from Morningstar so sometimes has trouble loading when M* is refreshing pages). I don't see a reason to use Vanguard ETFs at Schwab.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Target Index Funds are here: https://www.schwabfunds.com/secure/file/P-9430864
Thank you. This is very helpful. Can I ask another question.....?

If I were to buy a Schwab Target Index fund (as mentioned in some other posts), is there a resource that would allow me to compare the expense ratio of the target index fund with what I would pay by buying the underlying funds/etfs in the same proportions? I understand that it may be more tax efficient to own the underlying funds, but also wonder if it is cheaper? Does schwab charge for the 'simplicity' of the target index fund ?
A rough estimate is that it costs about 0.035% more. The Target Index funds are 0.08% and a three fund ETF portfolio is about 0.045 (depending on you allocation).

They also have some allocation to cash which functions as a zero duration bond in their way of thinking and is part of fixed income overall, but others say it's an opportunity for Schwab to loan out that money through their bank and only pay you part of what they get (based on average rates that are published someplace).

I think it's worth it because if you are like most, you'll probably want to tweak your allocation, and might not keep in balance.

The funds were originally 0.13% but everything was moved to the institutional price of 0.08%. Not sure why but it's really cheap.

You can do an exact comparison if you want...

You've got a number of great options here including VXUS. You are lucky to have such a good plan.
Thank you once again. What tool did you use to get your rough estimate? I'm hoping to learn so I can do for myself.
Eyeball. The googleheets link above gives a market cap weighted three fund portfolio and its expense. The ERs are easy to lookup either on Morningstar or Schwab's ETF page.

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