Best International Small Cap Option

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billy269
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Best International Small Cap Option

Post by billy269 » Fri Jan 19, 2018 9:08 pm

I'm at TDA and GWX and DLS are commission free options.

PRIDX is a no fee fund option but has a high expense, but I have seen people make the case that active international funds may be a good idea vs indexing...

Have had it in VSS in the past but it is no longer commission free at TDA.

This fund will represent 8% of my total portfolio. It is in a retirement account.

Which option would you go with?

Thank you for your thoughts!
Last edited by billy269 on Sat Jan 20, 2018 12:09 am, edited 1 time in total.

livesoft
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Re: Best International Small Cap Option

Post by livesoft » Fri Jan 19, 2018 9:14 pm

VSS of course. It still trades free if you get your rep to give you a free trade every time you will need it.
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ThePrince
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Re: Best International Small Cap Option

Post by ThePrince » Fri Jan 19, 2018 10:13 pm

I own both PRIDX and VSS.

billy269
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Re: Best International Small Cap Option

Post by billy269 » Fri Jan 19, 2018 11:06 pm

ThePrince wrote:
Fri Jan 19, 2018 10:13 pm
I own both PRIDX and VSS.
Do you split them 50/50?

MnD
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Re: Best International Small Cap Option

Post by MnD » Fri Jan 19, 2018 11:25 pm

GWX is a capital gains distribution disaster. AVOID!
https://us.spdrs.com/en/resources/distr ... x_code2=NA

How much is a trade commision on VSS? $7?
If you just must have a seperate small cap international position and a $7 trade is a big deal in the quantities you buy, buy a no commission broad international fund regularly. And then once per year or whatever, sell a portion and buy VSS.

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grabiner
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Re: Best International Small Cap Option

Post by grabiner » Sat Jan 20, 2018 12:10 pm

The commission for something like VSS (Vanguard's international small-cap ETF) is a trivial cost. If you buy 100 shares at the current market price of $124.30, an $8 commission to buy, and another $8 when you sell, is an extra 0.13% expense. And that's a one-time expense; if you hold the fund for 13 years, it's equivalent to paying an extra 0.01% annual in expenses.
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billy269
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Re: Best International Small Cap Option

Post by billy269 » Sat Jan 27, 2018 1:14 am

Still debating. I think I will hold the vss I have and add DLS. I think they complement each other pretty well. I like that DLS is smaller cap and more valuey than vss. I'll probably do 4% of each to make up my 8%.

Is that a bad idea? Is the main objection to DLS it's ER? This is for a tax sheltered account.

lazyday
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Re: Best International Small Cap Option

Post by lazyday » Sat Jan 27, 2018 4:16 am

I wouldn't pay the ER for DLS.

You could look at ISCF and FNDC. FNDC is free to trade at Schwab.

I don't own intl small today, but if I were to buy I'd consider ISCF and VSS.

Longtermgrowth
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Re: Best International Small Cap Option

Post by Longtermgrowth » Sat Jan 27, 2018 4:50 am

DLS is pretty sweet for developed small value, even given the expense ratio. I hold DLS, by the way. It is currently in Paul Merriman's best in class ETF list: https://paulmerriman.com/best-in-class- ... portfolio/

Sometimes getting deeper into small value territory is worth the added expense. There's an article from Larry Swedroe about that, but please don't make me search for that link :beer

lazyday
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Re: Best International Small Cap Option

Post by lazyday » Wed Jan 31, 2018 4:39 am

Longtermgrowth wrote:
Sat Jan 27, 2018 4:50 am
Sometimes getting deeper into small value territory is worth the added expense.
Of course that might come with more negative exposure to momentum and quality. And depending on the fund, perhaps you might overweight distressed "lottery tickets"--though I haven't looked for that in any fund.

Longtermgrowth
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Re: Best International Small Cap Option

Post by Longtermgrowth » Wed Jan 31, 2018 5:01 am

lazyday wrote:
Wed Jan 31, 2018 4:39 am
Longtermgrowth wrote:
Sat Jan 27, 2018 4:50 am
Sometimes getting deeper into small value territory is worth the added expense.
Of course that might come with more negative exposure to momentum and quality. And depending on the fund, perhaps you might overweight distressed "lottery tickets"--though I haven't looked for that in any fund.
Haha, I think you may have read a few of my other posts based on the lottery ticket comment. That should really be more centered towards the small growth side of the Morningstar style grid though.
Larry Swedroe also recommended DLS in his "Big Rocks" portfolio.
Guess I really need to dig up that link from Larry about expense ratios...(10 mins later haha)http://www.etf.com/sections/index-inves ... -etfs.html

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Re: Best International Small Cap Option

Post by lazyday » Wed Jan 31, 2018 5:12 am

Longtermgrowth wrote:
Wed Jan 31, 2018 5:01 am
Haha, I think you may have read a few of my other posts based on the lottery ticket comment. That should really be more centered towards the small growth side of the Morningstar style grid though.
Larry Swedroe also recommended DLS in his "Big Rocks" portfolio.
Guess I really need to dig up that link from Larry about expense ratios...(10 mins later haha)http://www.etf.com/sections/index-inves ... -etfs.html
Maybe :) I did read Larry's recent article and skimmed the thread on it.

SG lottery tickets--I suppose most lottery tickets are in SG. But companies that are nearly bankrupt might be in SV. This might not be a problem with DLS depending on its methodology. But I could see some fund that weights on value loading up on them during a bad economy.

I wonder if Larry would still pick DLS today. When the Edge Multifactor funds were new, he commented positively about them.

Unfortunately it seems difficult to analyse international funds, especially new ones. I tentatively like ISCF because the methodology seems like it might be good, but it's harder to follow than in most other funds. Maybe someday we'll have a decent factor analysis to see what loadings it has.

billy269
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Re: Best International Small Cap Option

Post by billy269 » Fri Feb 02, 2018 8:39 pm

I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?

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Re: Best International Small Cap Option

Post by sergio » Fri Feb 02, 2018 8:59 pm

billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Maybe, just maybe, because VSS sucks?

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jhfenton
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Re: Best International Small Cap Option

Post by jhfenton » Fri Feb 02, 2018 9:10 pm

billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Over the trailing 12 months (through yesterday), VSS is just a hair behind DLS, 31%-32%.

Any performance differences are due to substantial differences between the country weightings. VSS has 12% in Canada. DLS 0%. VSS has far less in Japan (16% vs 27%), but 6.5% in Taiwan and 4.7% in South Korea vs 0% and 0% for DLS. And of course VSS has 20% emerging markets, while DLS has more developed Europe.

And it wasn't as if EM dramatically outperformed. VWO was up 34% over the same 12 months through yesterday, not much of a boost over the rest of the world. And on the flip side, EWC (IShares Canada) was only up 12% during those 12 months. So VSS's stake in Canada was probably a relative drag.

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triceratop
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Re: Best International Small Cap Option

Post by triceratop » Fri Feb 02, 2018 9:13 pm

sergio wrote:
Fri Feb 02, 2018 8:59 pm
billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Maybe, just maybe, because VSS sucks?
As some would say: "Big if true".

But no, 5-year trailing returns as of the annual report 10/31/2017:

FTSE All-World ex-US Small-Cap Index Fund ETF Shares NAV: 9.04%
FTSE Global Small Cap ex US Index: 8.87%

It seems to be tracking its index well. ;) Your complaints are with the index construction, on which jhfenton goes into some detail.
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cookymonster
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Re: Best International Small Cap Option

Post by cookymonster » Fri Feb 02, 2018 9:19 pm

VSS has lousy tax efficiency with a QDI ratio of 0.41. SCHC is at 0.72 and is where I put new $ in the class.

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jhfenton
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Re: Best International Small Cap Option

Post by jhfenton » Fri Feb 02, 2018 9:23 pm

cookymonster wrote:
Fri Feb 02, 2018 9:19 pm
VSS has lousy tax efficiency with a QDI ratio of 0.41. SCHC is at 0.72 and is where I put new $ in the class.
I agree that VSS is a poor choice in taxable. It's our largest holding, but I wouldn't hold it in taxable.

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Re: Best International Small Cap Option

Post by caklim00 » Fri Feb 02, 2018 9:56 pm

I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF ishares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.

Theoretical
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Re: Best International Small Cap Option

Post by Theoretical » Fri Feb 02, 2018 9:56 pm

I think the best liquid option for a taxable account is the Schwab Fundamental International Small Cap FNDC at an ER of .39% or the PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio PDN at .49%. Both have been pretty good in taxable.

Going into tax-advantaged space, I'd strongly consider DLS, as it's much smaller than either of the two funds and has been a good DFA clone for some time now. But stay far away from it in taxable.

If you're willing to go Active TDA has a couple of genuinely interesting funds, but only hold them in tax-advantaged:

One is the Segall Bryant and Hamill International Small Cap Fund Class A SBHSX at 1.28%. It is an explicitly quantitative Quality, Value, and Momentum fund focused on International Small Caps. http://bit.ly/2DWXIdU Here is a list of factor regressions, and it has behaved as a DFA clone, including having very stable factor loadings. It has about 450 stocks.

Another is even more daring, but actually hits the real small and micro caps, on a global scale, and that's the Actively Managed METAX Global Microcap Value Fund - This one has a 2.11% ER (1.71 if you're putting in 100K). This one's average market cap is less than 300 million, and has about 300 companies, with a 20/30/50 US/Japan/Global-Ex-US and Japan weighting at the moment, including Emerging Markets. Its valuation measures are extremely valuey, but you must be aware that this is a fund built on fundamental analysis not quantitative analysis, so its style box/factor loadings are more likely to vary.

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Re: Best International Small Cap Option

Post by MikeMak27 » Fri Feb 02, 2018 10:04 pm

SCZ an ishares international small cap has performed well in the past for me. I will be purchasing more of it in the future.
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

Theoretical
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Re: Best International Small Cap Option

Post by Theoretical » Fri Feb 02, 2018 11:00 pm

SCZ and VSS have one thing definitely going for them: Their holding cost is below their expense ratio. In VSS's case, the fund pays you to own it.

SCZ last year had $27.6 Million in expenses and $15.8 Million in securities lending revenue, so you end up with an effective ER of .13% for its $8.7 Billion in net assets.

VSS last year had $6.3 Million in expenses and $11.8 Million in securities lending revenue, so you end up an effective ER of -.10%.

The State Street ETF GWX is also great at lending, but it is terrible in taxable as State Street does not seem to either care or know how to manage for taxes, so the fund routinely spits out capital gains.

livesoft
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Re: Best International Small Cap Option

Post by livesoft » Fri Feb 02, 2018 11:05 pm

VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
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grabiner
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Re: Best International Small Cap Option

Post by grabiner » Fri Feb 02, 2018 11:35 pm

Theoretical wrote:
Fri Feb 02, 2018 11:00 pm
SCZ and VSS have one thing definitely going for them: Their holding cost is below their expense ratio. In VSS's case, the fund pays you to own it.

SCZ last year had $27.6 Million in expenses and $15.8 Million in securities lending revenue, so you end up with an effective ER of .13% for its $8.7 Billion in net assets.

VSS last year had $6.3 Million in expenses and $11.8 Million in securities lending revenue, so you end up an effective ER of -.10%.
Another way to see this is that the fund has positive tracking error. Over the last five years, VSS has outperformed its index by 0.14% NAV. It isn't clear how much of this comes from securities lending, and how much from good trading practices. (When Small-Cap Index tracked the Russell 2000 which was vulnerable to front-running, it beat the index by 1% per year, possibly just by avoiding the front-runners.)
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lazyday
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Re: Best International Small Cap Option

Post by lazyday » Sat Feb 03, 2018 5:12 am

grabiner wrote:
Fri Feb 02, 2018 11:35 pm
(When Small-Cap Index tracked the Russell 2000 which was vulnerable to front-running, it beat the index by 1% per year, possibly just by avoiding the front-runners.)
That's just amazing!

I've seen a couple complaints over the years about Vanguard funds deviating from their indexes, but maybe they knew what they were doing. I suppose to avoid front runners, you'd have to differ from the index for a while, but if expected returns are higher than it might be well worth it.

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Re: Best International Small Cap Option

Post by fennewaldaj » Sat Feb 03, 2018 11:25 pm

So I have been using a principal international small cap separate account (from wifes 401k) that appears to be 1/2 DFA international small cap 1/2 principal international small cap with an expense ratio of 0.69.
The fund
https://www.principal.com/InvestmentPro ... mbol=ISC97
and its commonents
DFA
http://beta.morningstar.com/funds/XNAS/DFISX/quote.html
Principal active about 200 companies
http://beta.morningstar.com/funds/XNAS/PISMX/quote.html

So the end result is a portfolio with all 4000 or so companies of the DFA account but with about 200 over weighted. It seemed worth using to me. Do others agree with that assessment. I like the DFA side and the principal side seems fine as far as active funds go. The expense is not horrible for this asset class (and is only slightly higher than the DFA account on its own)

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Re: Best International Small Cap Option

Post by TropikThunder » Sat Feb 03, 2018 11:41 pm

livesoft wrote:
Fri Feb 02, 2018 11:05 pm
VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
Discount! :P

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snodog
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Re: Best International Small Cap Option

Post by snodog » Sun Feb 04, 2018 10:06 am

DLS, PDN and FNDC are all good.

Full disclosure: I own a nice chunk of FNDC.

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triceratop
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Re: Best International Small Cap Option

Post by triceratop » Mon Feb 05, 2018 12:38 pm

livesoft wrote:
Fri Feb 02, 2018 11:05 pm
VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
I guess we know now what gave. I hope there weren't large withdrawals on Friday; that could hurt the returns of the ETF investors as well as the other mutual fund investors.
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Re: Best International Small Cap Option

Post by sunnywindy » Mon Feb 05, 2018 2:28 pm

caklim00 wrote:
Fri Feb 02, 2018 9:56 pm
I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF iShares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.
I, too, like the iShares Edge MSCI Multifactor suite of funds and thought the International Small Cap ETF (ISCF) might not survive due to low AUM, trading volume, etc... As of today, it still only has $33 million, but I am fairly confident it will survive. For one, I think it will slowly keep gathering assets and supposedly once an ETF crosses the $30 mil hurdle, it is profitable. But secondly, iShares/Blackrock is coming out with a competitor or complement to the Morningstar Style Box that revolves around factors and is called the "Factor Box". Because of this, I don't see them cutting low AUM factor funds because they are perfect advertisements for the "Factor Box."

Even if you don't read the article, I would recommend scrolling to the diagram.
https://www.bloomberg.com/news/articles ... =etfcenter

Lastly, in early May 2018, we will have three-year data on the Edge Multifactor ETFs, so that will provide some good comparisons. So far, they have done well in the bull market and the recent loses of the past couple of days.
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billy269
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Re: Best International Small Cap Option

Post by billy269 » Thu Mar 01, 2018 7:55 pm

This has been the most difficult part to figure out in my portfolio. I plan to leave $ in these funds for at least 30 years. I'm looking to tilt small/medium (about 50% large, 50% small/medium) and value. Currently at my Roth IRA Edge account (no commissions, so I can buy anything) for my 34% international allocation I am thinking:

13 VEA
8 VWO
9 VSS
2 EEMS
2 FNDC

With this I have about a 50/50 split in Large vs Mid/Small (in both developed and EM) and a little value tilt. I also have about a quarter of my international holdings in emerging markets, which is my target. Upon first glance, it seems like I have more than 25% EM, but VWO is only 83% EM and EEMS is only 63% EM.


For my Roth i401k TDA account I am thinking the following (all below are commission free at TDA):

12 SPDW
6 SPEM
2 EWX
2 DGS
2 GWX
2 DLS
8 PRIDX (I know, high fees but has been a stellar fund for last 30 years and int mid/small is one of the better performing active fund sectors)

With this I don't get much value (since PRIDX is tilted growth), but it is 50/50 Large vs Mid/Small (in both developed and EM) and around a quarter EM. I don't like the lack of liquidity of FNDC, EEMS, DLS, DGS, GWX, and EWX so I am thinking I will just buy a little of each.

Thoughts? I know people won't like how many funds this is, but it doesn't bother me to have a 8-10 fund portfolio. That is much simpler than it used to be!

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