SWISX vs VXUS: Which International ETF Wins for Your Portfolio?

# SWISX vs VXUS: Which International ETF Wins for Your Portfolio?

Investing in international markets diversifies your portfolio beyond U.S. stocks, reducing risk and capturing global growth opportunities. Two popular options—SWISX and VXUS—offer distinct approaches to international exposure. This comprehensive comparison breaks down their differences to help you decide which aligns best with your investment strategy.

## Understanding the Contenders: SWISX and VXUS Explained

**Schwab International Index Fund (SWISX)** is a mutual fund tracking the MSCI EAFE Index, focusing exclusively on **large- and mid-cap stocks across 21 developed markets** like Japan, UK, and Germany. It excludes emerging markets and small-cap companies.

**Vanguard Total International Stock ETF (VXUS)** is an exchange-traded fund tracking the FTSE Global All Cap ex US Index. It provides **comprehensive exposure to over 7,800 stocks** across developed and emerging markets, including small-cap companies.

## Key Differences: SWISX vs VXUS Head-to-Head

### 1. Geographic Coverage & Diversification
– **SWISX**: Covers **developed markets only** (Europe, Australasia, Far East).
– **VXUS**: Includes **both developed (79%) and emerging markets (21%)** like China, Brazil, and India.

### 2. Market Cap Inclusion
– **SWISX**: Large- and mid-cap stocks only (98% of eligible market).
– **VXUS**: All-cap coverage—large, mid, and small-cap stocks (99%+ of investable market).

### 3. Expense Ratios & Costs
| Fund | Expense Ratio | Minimum Investment |
|——–|—————|———————|
| SWISX | 0.06% | $0 (Schwab accounts)|
| VXUS | 0.07% | 1 share (~$65) |

### 4. Tax Efficiency & Structure
– **SWISX**: Mutual fund structure—trades once daily after market close.
– **VXUS**: ETF structure—trades intraday with potential tax advantages from in-kind redemptions.

## Performance and Risk Comparison

Historically, VXUS has delivered broader diversification benefits but with slightly higher volatility due to emerging market exposure. SWISX offers more stability but misses growth from emerging economies. Consider:

– **Emerging Market Impact**: VXUS captured China’s 2020-2021 surge but suffered during EM downturns.
– **Currency Risk**: Both funds are subject to forex fluctuations, but VXUS has greater exposure.
– **Dividend Yields**: SWISX yields ~3.2% vs VXUS’ ~3.4% (historical averages).

## Which Fund Should You Choose?

### Pick SWISX if you:
– Want **lower volatility** with developed-market focus
– Use Schwab platform and prefer mutual funds
– Seek minimal expense ratios

### Choose VXUS if you:
– Desire **maximum diversification** (EM + small-caps)
– Prioritize tax efficiency in taxable accounts
– Use any brokerage (ETFs trade universally)

## Frequently Asked Questions (FAQ)

**Q: Does SWISX include Canadian stocks?**
A: No. SWISX follows the MSCI EAFE Index, which excludes North America.

**Q: Can VXUS replace a dedicated emerging markets fund?**
A: Yes. With 21% EM allocation, it provides substantial exposure, though some investors add dedicated EM funds for heavier weighting.

**Q: Which has better liquidity?**
A: VXUS trades like a stock with high daily volume (~3M shares). SWISX settles overnight but has no liquidity concerns.

**Q: Are dividends taxed differently?**
A: Both qualify for foreign tax credits. VXUS may generate fewer taxable events in non-retirement accounts.

**Q: Can I hold both funds together?**
A: It’s redundant. They overlap significantly in developed markets. Choose one based on your EM and small-cap preferences.

## Final Verdict
VXUS is the superior choice for investors seeking truly comprehensive international exposure, especially in tax-advantaged accounts. SWISX shines for Schwab users prioritizing cost efficiency and developed-market stability. Both offer best-in-class affordability—your decision hinges on whether emerging markets and small-caps align with your risk tolerance and growth objectives. Always consult a financial advisor to match investments with your goals.