SWISX vs VXUS: Which International ETF Fits Your Portfolio?

Investors seeking global diversification beyond U.S. markets often compare Schwab International Index Fund (SWISX) and Vanguard Total International Stock ETF (VXUS). Both offer low-cost exposure to international equities but differ significantly in structure, coverage, and strategy. This comprehensive analysis breaks down their key differences to help you make an informed decision.

Fund Overview: Structure and Objectives

SWISX (Schwab International Index Fund) is a mutual fund tracking the MSCI EAFE Index, focusing exclusively on developed markets outside North America. It holds approximately 900 large- and mid-cap stocks from Europe, Australasia, and the Far East.

VXUS (Vanguard Total International Stock ETF) is an exchange-traded fund following the FTSE Global All Cap ex US Index. It provides comprehensive exposure to both developed and emerging markets, encompassing over 8,000 stocks across all market caps.

Key Differences: SWISX vs VXUS

• Market Coverage: SWISX covers 21 developed countries (0% emerging markets). VXUS spans 47+ countries including China, Brazil, and Taiwan.
• Asset Allocation: SWISX: 100% developed markets. VXUS: ~75% developed, ~25% emerging markets.
• Holdings Diversification: SWISX: ~900 large/mid-cap stocks. VXUS: 8,000+ stocks including small-caps.
• Top Holdings (Representative):
  • SWISX: Nestlé, ASML, Toyota, Novartis
  • VXUS: Taiwan Semiconductor, Tencent, Samsung, LVMH
• Expense Ratio: SWISX: 0.06% | VXUS: 0.07% (negligible difference)

Performance and Risk Analysis

Historical returns vary due to differing market exposures:

• SWISX performance closely correlates with European and Japanese markets
• VXUS includes emerging markets’ higher growth potential but with increased volatility
• Neither fund hedges currency risk, exposing investors to forex fluctuations

Key Consideration: Over the past decade, emerging markets (included in VXUS) have outperformed developed markets in some periods but underperformed in others, making VXUS more sensitive to global economic shifts.

Tax Efficiency and Costs

• Tax Treatment: VXUS (as an ETF) typically generates fewer taxable capital gains distributions than SWISX (a mutual fund)
• Trading Flexibility: VXUS trades intraday like a stock; SWISX prices once daily
• Minimum Investment: SWISX: $0 at Schwab | VXUS: 1 share (~$60)

Which Fund Should You Choose?

Consider SWISX If:

• You want pure developed-market exposure
• You prefer mutual funds and use Schwab platform
• You seek minimal volatility from emerging markets

Consider VXUS If:

• You want true “total international” coverage
• Tax efficiency in taxable accounts is a priority
• You value small-cap exposure and broader diversification

Frequently Asked Questions (FAQ)

Q: Does SWISX include Canadian stocks?

A: No. SWISX follows the MSCI EAFE Index, which excludes North America entirely.

Q: Can VXUS replace a dedicated emerging markets fund?

A: For most investors, yes. Its 25% EM allocation provides substantial exposure, though some add dedicated EM funds for overweighting.

Q: Which fund has better dividend yields?

A: Historically, SWISX yields slightly higher (3.0% vs VXUS’s 2.8%) due to its focus on dividend-friendly developed markets.

Q: Are these funds suitable for IRAs?

A: Absolutely. Both are excellent tax-efficient choices for retirement accounts where dividend taxation is deferred.

Q: How do currency fluctuations affect these ETFs?

A: Both are unhedged. A strong U.S. dollar reduces returns when converting foreign gains, while a weak dollar amplifies them.

Final Verdict

SWISX and VXUS both deliver low-cost international exposure but serve different strategies. SWISX offers focused, stable access to established economies, while VXUS provides comprehensive global diversification in a single ETF. For most investors building a diversified portfolio, VXUS’s all-cap, all-region approach makes it the more complete solution. However, SWISX remains compelling for Schwab users seeking targeted developed-market exposure with razor-thin fees. Always consult current fund documents before investing, as holdings and ratios may change.