Approximating total international fund (Difference between VSS and SCHC?)

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
orangejelloh
Posts: 5
Joined: Fri Nov 11, 2016 11:02 am

Approximating total international fund (Difference between VSS and SCHC?)

Post by orangejelloh » Tue Oct 10, 2017 9:30 am

Most of my international holdings are in the I fund in the TSP. I am trying to figure out the best way to approximate the total international market, as well outlined in the Wiki (https://www.bogleheads.org/wiki/Approxi ... ock_market).

I would like to buy small cap and emerging markets in a tax advantaged account, since I have read that the TSP I fund may be moving to a true total international index, like VTIAX, and thus I may end up wanting to sell all the small cap and emerging market funds in the next few years.

My wife has a Vanguard Roth IRA and I have a Schwab Roth IRA. I can't put in the appropriate weight of VSS (small cap) and VWO (EM) in her Vanguard Roth IRA each year to balance my I fund contribution and keep under the limit of $5500. I realize some options would be to sell some of her current Roth IRA holdings or transfer my Roth to Vanguard. Those are options, but involve some headache.

So, I am thinking of buying either:
1) VWO and SCHC
OR
2) VSS and SCHE

I believe VWO has China A shares, while SCHE does not.

Is the only difference between VSS and SCHC that VSS includes Emerging Markets? If so, it seems to me that the best option for me would be # 1. That way, I can gain exposure to China A (which I gather is controversial), and I can avoid the overlap that VWO+VSS has. Is there anything else that I'm not considering?

User avatar
in_reality
Posts: 4326
Joined: Fri Jul 12, 2013 6:13 am

Re: Approximating total international fund (Difference between VSS and SCHC?)

Post by in_reality » Tue Oct 10, 2017 10:47 am

#1 seems like a good strategy though I’d go for #2.

Canada and Korea seem to be where differences are. Some international indexes exclude North America (so no Canada) and some include Korea as developed while others as emerging.

That said anyway it turns out, #1 looks fine.

Can’t look it up now myself...

orangejelloh
Posts: 5
Joined: Fri Nov 11, 2016 11:02 am

Re: Approximating total international fund (Difference between VSS and SCHC?)

Post by orangejelloh » Wed Oct 11, 2017 6:05 pm

My understanding is that none of these funds at Vanguard or Schwab for small-cap and EM include Canada and Korea. Seems like the only option is to add a Canada and Korea ETF if you want to truly mimic a total international fund.

In regards to small-cap international and EM funds, would it be reasonable to use VWO and SCHC, or is there a reason to prefer VSS and SCHE and/or make the effort to only use Vanguard and use VSS+VWO?

TropikThunder
Posts: 647
Joined: Sun Apr 03, 2016 5:41 pm

Re: Approximating total international fund (Difference between VSS and SCHC?)

Post by TropikThunder » Wed Oct 11, 2017 8:49 pm

orangejelloh wrote:
Wed Oct 11, 2017 6:05 pm
My understanding is that none of these funds at Vanguard or Schwab for small-cap and EM include Canada and Korea. Seems like the only option is to add a Canada and Korea ETF if you want to truly mimic a total international fund.

In regards to small-cap international and EM funds, would it be reasonable to use VWO and SCHC, or is there a reason to prefer VSS and SCHE and/or make the effort to only use Vanguard and use VSS+VWO?
  • VSS tracks the FTSE All-World ex-US Small-Cap Index (both Developed and Emerging Markets). This index includes both Canada (currently ~9% of VSS) and South Korea (~4.7%).
  • VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index (Emerging only, no Developed, all cap) This index does NOT include South Korea or Canada since FTSE classifies them as Developed.
  • SCHC tracks the FTSE Developed Small Cap ex US Liquid Index (Developed only, no Emerging, small cap only). This index does include Canada (~14% of SCHC) and South Korea (~4.6%).
  • SCHE tracks the FTSE Emerging Index (Emerging only, no Developed, no small cap). This index does NOT include South Korea or Canada since FTSE classifies them as Developed

User avatar
ruralavalon
Posts: 11902
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Approximating total international fund (Difference between VSS and SCHC?)

Post by ruralavalon » Thu Oct 12, 2017 1:18 pm

orangejelloh wrote:
Tue Oct 10, 2017 9:30 am
Most of my international holdings are in the I fund in the TSP. I am trying to figure out the best way to approximate the total international market, as well outlined in the Wiki (https://www.bogleheads.org/wiki/Approxi ... ock_market).

I would like to buy small cap and emerging markets in a tax advantaged account, since I have read that the TSP I fund may be moving to a true total international index, like VTIAX, and thus I may end up wanting to sell all the small cap and emerging market funds in the next few years.

My wife has a Vanguard Roth IRA and I have a Schwab Roth IRA. I can't put in the appropriate weight of VSS (small cap) and VWO (EM) in her Vanguard Roth IRA each year to balance my I fund contribution and keep under the limit of $5500. I realize some options would be to sell some of her current Roth IRA holdings or transfer my Roth to Vanguard. Those are options, but involve some headache.

So, I am thinking of buying either:
1) VWO and SCHC
OR
2) VSS and SCHE

I believe VWO has China A shares, while SCHE does not.

Is the only difference between VSS and SCHC that VSS includes Emerging Markets? If so, it seems to me that the best option for me would be # 1. That way, I can gain exposure to China A (which I gather is controversial), and I can avoid the overlap that VWO+VSS has. Is there anything else that I'm not considering?
The I Fund covers only larger companies in developed markets, omitting emerging markets and small company stocks.

In my opinion the omission of emerging markets is very significant, the omission of small-cap (only about 4% of a total international fund) is not very significant.

I suggest simply adding some Vanguard Emerging Markets Index Fund or ETF in her Roth IRA, and don't trouble with small-cap.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Post Reply