SWISX vs VXUS: Which International ETF Is Right for Your Portfolio?

SWISX vs VXUS: The Ultimate International ETF Showdown

For investors seeking global diversification beyond U.S. markets, SWISX and VXUS represent two powerhouse options. The Schwab International Index Fund (SWISX) and Vanguard Total International Stock ETF (VXUS) both offer exposure to international equities but take different approaches. This comprehensive comparison breaks down their key differences in coverage, costs, performance, and structure to help you determine which aligns best with your investment strategy.

What Is SWISX? The Developed Markets Specialist

SWISX is a mutual fund from Charles Schwab tracking the MSCI EAFE Index, focusing exclusively on developed markets outside North America. This includes economic powerhouses like Japan, the UK, Germany, and Australia. With over 800 holdings, SWISX targets large and mid-cap companies across 21 developed nations. As a mutual fund, it trades once daily at the net asset value (NAV) price.

What Is VXUS? The All-Encompassing Global ETF

Vanguard’s VXUS takes a broader approach as an exchange-traded fund tracking the FTSE Global All Cap ex US Index. It covers over 8,500 stocks across both developed and emerging markets, spanning nearly 60 countries. This includes exposure to China, India, Brazil, and Taiwan alongside developed European and Asian economies. VXUS trades throughout the day like a stock and includes companies of all market capitalizations.

Key Differences: SWISX vs VXUS Compared

• Market Coverage: SWISX = Developed markets only | VXUS = Developed + emerging markets
• Number of Holdings: SWISX ≈ 800 stocks | VXUS ≈ 8,500+ stocks
• Asset Class Focus: SWISX = Large/mid-cap | VXUS = All caps (large, mid, small)
• Structure: SWISX = Mutual fund | VXUS = ETF
• Trading Flexibility: SWISX = Daily NAV pricing | VXUS = Real-time trading
• Regional Exposure: SWISX = Heavy Europe/Japan tilt | VXUS = Broader emerging market allocation

Performance and Risk Comparison

Historical performance between these funds diverges primarily due to their different market exposures. During periods of emerging market outperformance, VXUS typically leads. When developed markets surge, SWISX often shines. Over the past decade, VXUS’s inclusion of emerging markets has resulted in slightly higher volatility but also greater growth potential during global expansion cycles. Both have delivered competitive long-term returns relative to their benchmarks.

Expense Ratios and Costs Breakdown

Both funds boast ultra-low expense ratios reflective of their index-fund origins:

• SWISX: 0.06% expense ratio
• VXUS: 0.07% expense ratio

While SWISX holds a slight cost advantage, the 0.01% difference translates to just $1 annually per $10,000 invested. More significant cost considerations include:

• SWISX may have minimum investments ($0 at Schwab, but up to $100 elsewhere)
• VXUS may incur brokerage commissions at non-Vanguard platforms
• Foreign tax withholding impacts both funds similarly

Tax Efficiency Considerations

VXUS holds an advantage as an ETF due to its more tax-efficient structure. The creation/redemption mechanism of ETFs typically generates fewer capital gains distributions than mutual funds like SWISX. However, both funds benefit from foreign tax credits that offset U.S. tax liabilities on international dividends. Tax-sensitive investors in taxable accounts may prefer VXUS for its structural efficiency.

Which Fund Should You Choose?

Choose SWISX if you:

• Want focused exposure to stable developed markets
• Prefer mutual funds and use Schwab’s platform
• Seek maximum cost efficiency for large-cap international stocks
• Want to avoid emerging markets volatility

Choose VXUS if you:

• Want comprehensive global exposure including emerging markets
• Value small-cap diversification benefits
• Prioritize tax efficiency in taxable accounts
• Prefer ETF flexibility for tactical trading
• Use Vanguard or commission-free ETF platforms

Can You Hold Both SWISX and VXUS?

While possible, significant overlap makes this generally unnecessary. SWISX’s developed-market holdings are essentially a subset of VXUS’s broader portfolio. Investors might combine them only if intentionally overweighting developed markets while maintaining emerging market exposure. For most portfolios, choosing one based on your desired market coverage is more efficient.

Frequently Asked Questions (FAQ)

Q: Does SWISX include Canadian stocks?
A: No. SWISX follows the MSCI EAFE Index which excludes Canada and the United States.

Q: How often does VXUS rebalance?
A: VXUS rebalances quarterly to match its underlying index, with minor daily adjustments.

Q: Can I automatically invest in SWISX?
A: Yes. As a mutual fund, SWISX supports automatic investment plans at Schwab.

Q: Does VXUS pay dividends?
A: Yes. VXUS distributes dividends quarterly, with varying yields based on global dividend trends.

Q: Which fund has lower volatility?
A: SWISX typically shows slightly lower volatility due to its exclusion of emerging markets.

Q: Are there commission fees for VXUS?
A: Most major brokerages offer commission-free VXUS trading, but verify with your specific platform.

The Final Verdict

Both SWISX and VXUS deliver cost-effective international diversification through different approaches. SWISX offers precision targeting of established developed markets with rock-bottom costs, ideal for Schwab users seeking stability. VXUS provides unparalleled breadth with all-cap, all-world ex-US exposure in a tax-efficient wrapper, perfect for comprehensive global allocation. Your choice ultimately depends on whether you prioritize focused developed-market stability (SWISX) or complete international diversification including emerging markets (VXUS).

Disclaimer: This content is for informational purposes only and not investment advice. Securities involve risk including potential loss of principal. Past performance doesn’t guarantee future results. Consult a financial advisor before making investment decisions.