Investing, i know that i should, but how – straight dope message board

Small-cap value is a discretionary (albeit disciplined algorithmic) strategy, so some care is warranted – not all indices/funds are equal or equally well managed. Blackrock and Vanguard are the two best. IJS and VBR track different indices. IJS has higher fees, but the average market cap of its indexed stocks is half the size. I think diversifying across the two indices/funds is warranted.

SCZ is the most expensive fund here at 0.40%. But choices for international small cap exposure for a U.S. investor are limited, and this is the best. It gives exposure to international small cap in exactly the places where small cap has historically outperformed – i.e.

excluding emerging markets and excluding Canada. For this reason, it has consistently outperformed the cheaper Vanguard fund (VSS) by far more than the difference in management fees.

IEFA and IEMG have corresponding Vanguard funds (VEA, VWO) that are almost indistinguishable in fees, size, performance. The Blackrock funds seem to do a better job of identifying Qualifying Dividends in their international funds (better tax treatment for your dividend income). And other things being equal, better to diversify assets across two equally good fund managers than have everything with Vanguard.

I recently read about a newly retired multi-millionaire-like 2 or 3 million. He got there the old fashioned way- worked and saved and invested like clock-work over his entire career. After he retired he found himself associating with people in similar situations. As a kind of hobby, he started asking them how they retired at that level. The majority of them had done it the same way he had. He kept asking around and eventually talked to over 200 people in similar situations. Again the majority put their retirement money in an index fund over several decades. Obviously these were pretty well-paid individuals but the strategy was the same. S&P500 index at the lowest cost possible. Invest every 2 weeks regardless of the market. If possible increase your investments during downturns. Those that didn’t follow the strategy were self-selected out of the group by not making very much. The strongest ones would follow the market closely-but never deviate from the strategy. They would look but not touch!

Small-cap value is a discretionary (albeit disciplined algorithmic) strategy, so some care is warranted – not all indices/funds are equal or equally well managed. Blackrock and Vanguard are the two best. IJS and VBR track different indices. IJS has higher fees, but the average market cap of its indexed stocks is half the size. I think diversifying across the two indices/funds is warranted.

SCZ is the most expensive fund here at 0.40%. But choices for international small cap exposure for a U.S. investor are limited, and this is the best. It gives exposure to international small cap in exactly the places where small cap has historically outperformed – i.e. excluding emerging markets and excluding Canada. For this reason, it has consistently outperformed the cheaper Vanguard fund (VSS) by far more than the difference in management fees.

IEFA and IEMG have corresponding Vanguard funds (VEA, VWO) that are almost indistinguishable in fees, size, performance. The Blackrock funds seem to do a better job of identifying Qualifying Dividends in their international funds (better tax treatment for your dividend income). And other things being equal, better to diversify assets across two equally good fund managers than have everything with Vanguard.

For foreign small cap value there does not appear to be many options for those of us who don’t have access to DFA. But I’d prefer to use a foreign large cap value ETF over a foreign small cap ETF, since historically the value premium has been both larger and more stable than the small cap premium, at least domestically we know this has been the case.