SWISX vs. SFNNX: Comparing Schwab’s International Index Funds

SWISX vs. SFNNX: Which International Index Fund Is Right for You?

Investors seeking international diversification often turn to low-cost index funds like Schwab International Index Fund (SWISX) and Schwab Fundamental International Large Company Index Fund (SFNNX). Both funds target non-U.S. equities but use different strategies to achieve their goals. In this comparison, we’ll break down their differences in performance, fees, holdings, and investment approaches to help you decide which fund aligns with your portfolio.

What Are SWISX and SFNNX?

Schwab International Index Fund (SWISX)

• Objective: Tracks the MSCI EAFE Index, covering developed markets outside North America.
• Strategy: Market-cap-weighted, passive investing in large- and mid-cap stocks.
• Expense Ratio: 0.06% (ultra-low cost).
• Top Holdings: Companies like Nestlé, Toyota, and ASML Holdings.

Schwab Fundamental International Large Company Index Fund (SFNNX)

• Objective: Follows the Russell RAFI Developed ex-U.S. Large Company Index.
• Strategy: Fundamental weighting based on dividends, cash flow, and book value.
• Expense Ratio: 0.25% (low cost but higher than SWISX).
• Top Holdings: BP, HSBC, and Samsung Electronics.

Key Differences Between SWISX and SFNNX

1. Investment Strategy

SWISX uses a traditional passive approach, mirroring the MSCI EAFE Index. It emphasizes market capitalization, meaning larger companies dominate its portfolio. SFNNX, however, employs a “fundamental” strategy, selecting companies based on financial metrics rather than size. This can lead to overweighting undervalued stocks.

2. Geographic Exposure

• SWISX: 80%+ in Europe and Japan.
• SFNNX: Broader allocation, including heavier weights in the UK and emerging markets like South Korea.

3. Performance and Risk

Over the past decade, SWISX has delivered average annual returns of ~5.2%, while SFNNX has lagged slightly at ~4.8%. However, SFNNX’s value tilt may outperform during market downturns. Both funds carry currency risk and political/economic volatility inherent to international investing.

4. Costs and Tax Efficiency

• SWISX: Lower expense ratio (0.06%) and lower turnover, making it more tax-efficient.
• SFNNX: Higher fees (0.25%) due to active rebalancing of fundamental factors.

SWISX vs. SFNNX: Which Should You Choose?

• Pick SWISX if: You want ultra-low costs, broad market exposure, and a hands-off strategy.
• Choose SFNNX if: You prefer a value-oriented approach and are comfortable with slightly higher fees for potential long-term alpha.

FAQ: SWISX vs. SFNNX

1. Are These Funds Suitable for Retirement Accounts?

Yes. Both SWISX and SFNNX are tax-efficient for IRAs or 401(k)s, though SWISX’s lower turnover makes it slightly better for taxable accounts.

2. Can I Invest in Both SWISX and SFNNX?

Combining them provides blended exposure to market-cap and value strategies, but ensure you’re not overexposing to overlapping regions like Europe.

3. Do These Funds Pay Dividends?

Yes. SWISX yields ~3.1% annually, while SFNNX offers ~3.4% due to its focus on high-dividend companies.

4. How Do They Compare to Vanguard’s International Funds?

Schwab’s funds are competitively priced, but Vanguard’s VTIAX (0.11% expense ratio) offers emerging markets exposure, which SWISX lacks.

Final Thoughts

SWISX and SFNNX cater to different investor priorities: cost efficiency versus factor-based investing. Analyze your risk tolerance, cost sensitivity, and belief in active vs. passive strategies before deciding. For most investors, SWISX’s simplicity and low fees make it a strong core holding, while SFNNX serves as a strategic satellite allocation.