SWISX vs SFNNX: Which Schwab International Fund Is Right for You?
When building a diversified portfolio, international equity exposure is crucial for long-term growth. Two popular options from Charles Schwab are the Schwab International Index Fund (SWISX) and the Schwab Fundamental International Large Company Index Fund (SFNNX). Both target non-U.S. stocks but employ different strategies. This article breaks down their differences in performance, costs, and risk to help you decide which fund aligns with your goals.
Understanding SWISX: Schwab International Index Fund
SWISX tracks the MSCI EAFE Index, covering large- and mid-cap stocks across 21 developed markets outside the U.S. and Canada. Key features include:
- Market-Cap Weighting: Holdings are weighted by company size, favoring giants like Nestlé and Toyota.
- Low Expense Ratio: 0.06% annually, making it one of the cheapest international funds.
- Broad Diversification: 1,000+ stocks across Europe (60%), Japan (25%), and Australasia (15%).
- Passive Management: Mirrors index changes quarterly, minimizing turnover.
Understanding SFNNX: Schwab Fundamental International Large Company Index Fund
SFNNX follows the Russell RAFI Developed ex-U.S. Large Company Index, using fundamental factors to select stocks. Key features:
- Fundamental Weighting: Selects companies based on dividends, cash flow, and book value, emphasizing undervalued stocks.
- Higher Expense Ratio: 0.25% annually, reflecting its active-like strategy.
- Concentrated Holdings: 500+ stocks with heavier allocations to financials and energy sectors.
- Value Tilt: Historically outperforms in markets favoring value stocks.
Key Differences Between SWISX and SFNNX
- Investment Strategy: SWISX is market-cap-weighted for broad exposure; SFNNX uses fundamental metrics for a value bias.
- Performance: SWISX excels in growth markets, while SFNNX shines during value rallies or high inflation.
- Cost: SWISX costs 0.06% vs. SFNNX’s 0.25%, saving $19 annually per $10,000 invested.
- Diversification: SWISX holds twice as many stocks, reducing single-stock risk.
- Tax Efficiency: SWISX’s lower turnover (4% vs. 15%) generates fewer taxable events.
Which Fund Should You Choose?
Pick SWISX if: You want low-cost, tax-efficient exposure to developed markets and prefer a hands-off approach.
Choose SFNNX if: You seek value-oriented stocks, can tolerate higher volatility, and don’t mind the extra cost for potential outperformance.
For a balanced approach, consider holding both: 70% SWISX for core exposure and 30% SFNNX for value diversification.
Frequently Asked Questions (FAQ)
1. Which fund has higher historical returns?
SFNNX outperformed SWISX in the 2010-2020 value-driven cycle but lags during growth-dominated periods like 2021-2023.
2. Are these funds suitable for retirement accounts?
Yes. Both are ideal for IRAs or 401(k)s, though SFNNX’s higher turnover is less tax-impacting in tax-deferred accounts.
3. Do they include emerging markets?
No. For EM exposure, pair with Schwab Emerging Markets Equity ETF (SCHE).
4. Can I buy these funds outside Schwab?
Yes, through most brokerages, but Schwab clients avoid transaction fees.
5. How often are dividends paid?
Both distribute dividends annually in December.
