Vanguard Launched FTSE All-World ex-US Small-Cap ETF

Mutual fund giant Vanguard Group launched a new exchanged-traded fund (ETF) last week. The Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), incepted on April 2, tracks the performance of the FTSE Global Small-Cap ex-US Index. According to FTSE, the Global Small-Cap ex-US Index is a freefloat-adjusted, market-capitalization-weighted index that covers more than 3,300 small-cap stocks across 47 countries, including both emerging and developed markets. As of October 31, 2008, the largest markets in the Index were the UK, Japan, Canada, France, and Switzerland, based on market capitalization.

The investment objective of VSS is to use a passive method to track the performance of the above mentioned index that measures the investment return of stocks of international small-cap companies. The fund currently holds about 1,500 of the 3,300 stocks in the index. The ETF has an expense ratio (ER) of 0.38%. With the ER, the cost of owning the fund for one year is $39, and $122 for three years, according to the fund’s prospectus.

Besides the ETF, Vanguard also introduced a mutual fund version of the fund, Vanguard FTSE All-World ex-US Small-Cap Index Fund (VFSVX). The mutual fund costs a little less to own comparing to its ETF counterpart, as for all ETF-mutual fund pairs. However, you can dollar-cost averaging mutual fund as there’s usually no additional cost to buy/sell mutual fund shares if it’s done with the fund company (such as Vanguard). With ETFs, you will usually need to pay your broker commissions to trade ETFs.

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If you are interested in small-cap ETFs, there are a few other options in addition to VSS:

  • SPDR S&P International Small Cap (GWX)
  • SPDR S&P Emerging Markets Small Cap (EWX)
  • iShares FTSE Developed Sm Cap ex-North America (IFSM)
  • iShares MSCI EAFE Small Cap Index (SCZ)

They all, however, charge a higher fee than the Vaugard fund does. When it comes to cost, Vanguard is hard to be, whether you are investing in ETFs or mutual funds.

*Chart from INO MarketClub

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