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

When building a globally diversified portfolio, Schwab’s SWISX and SFNNX stand out as popular international index fund options. Both offer exposure to developed markets outside the U.S., but their distinct strategies cater to different investor needs. This comprehensive comparison examines their key differences, performance, and suitability to help you determine which fund aligns with your financial goals.

## SWISX vs SFNNX: Core Differences Explained

These funds take fundamentally different approaches to international investing:

– **Investment Strategy**:
– SWISX tracks the **MSCI EAFE Index** using traditional market-cap weighting
– SFNNX follows the **Russell RAFI Developed ex-U.S. Large Company Index** using fundamental factors (sales, cash flow, dividends)

– **Portfolio Composition**:
– SWISX holds over 1,300 stocks across 21 developed countries
– SFNNX maintains about 800 holdings with a value-oriented bias

– **Geographic Allocation**:
– Both focus on Europe (≈60%), Japan (≈20%), and Pacific regions
– SWISX has slightly higher UK exposure (15% vs 12%)

– **Cost Structure**:
– SWISX: 0.06% expense ratio
– SFNNX: 0.25% expense ratio

– **Sector Emphasis**:
– SWISX mirrors market weights (financials 20%, industrials 14%)
– SFNNX overweight value sectors like energy and materials

## Performance and Risk Analysis

Historical data reveals meaningful divergence in returns and volatility:

– **10-Year Annualized Returns**:
– SWISX: 4.2%
– SFNNX: 4.8% (benefiting from value cycles)

– **Risk Profile**:
– SFNNX shows higher volatility (standard deviation of 15.3 vs 14.1)
– SWISX experienced shallower drawdowns during market stress

– **Dividend Characteristics**:
– SFNNX yields 3.4% vs SWISX’s 2.9%
– Both distribute dividends quarterly

Market conditions significantly impact relative performance. SFNNX typically outperforms when value stocks lead, while SWISX shines during growth-dominated rallies.

## Which Fund Fits Your Portfolio?

### Choose SWISX If:
– You seek pure market representation at minimal cost
– Low expense ratios are your top priority
– You prefer lower portfolio turnover (5% vs SFNNX’s 15%)
– You’ll pair with separate emerging markets funds

### Choose SFNNX If:
– You want built-in value exposure
– Higher dividend income matters for your strategy
– You believe fundamentally weighted strategies will outperform long-term
– You accept moderately higher fees for factor-based approach

For maximum diversification, many investors hold both: SWISX for core exposure and SFNNX for strategic value tilting.

## Frequently Asked Questions

**Q: Do these funds include emerging markets?**
A: No. Both exclude emerging economies. Consider adding SCHE (Schwab Emerging Markets ETF) for complete global exposure.

**Q: Which has better tax efficiency?**
A: SWISX is more tax-efficient due to lower turnover. Both are better held in tax-advantaged accounts.

**Q: What’s the minimum investment?**
A: $0 for both when purchased through Schwab platforms.

**Q: How often do they rebalance?**
A: SWISX follows index reconstitution semi-annually; SFNNX rebalances quarterly based on fundamental factors.

**Q: Can I automate investments?**
A: Yes. Both support automatic investing plans through Schwab brokerage accounts.

**Q: Which has outperformed recently?**
A: SFNNX led during 2021-2022 value rally; SWISX gained advantage in 2023 growth rebound. Cycle-dependent performance highlights their complementary nature.

## Final Considerations

SWISX delivers straightforward, low-cost exposure to international developed markets, making it ideal for passive investors. SFNNX offers a strategic alternative through its fundamental weighting methodology, potentially enhancing returns during value cycles at a moderately higher cost. Your choice ultimately depends on whether you prioritize pure market replication (SWISX) or factor-based tilting (SFNNX). Many successful investors incorporate both to balance cost efficiency with strategic positioning. Always review current prospectuses and consider consulting a financial advisor to align selections with your specific objectives.