Need for International Small Cap ?

[mb]

I would welcome any advice/suggestions/opinions on:

(1) The benefits of international small cap exposure? How important is it?
(2) A good vehicle to get international small cap exposure? (It would be in a taxable account.)

I presently have 24% of my equities in international. (19% EAFE index funds, 3% Vanguard emerging market index fund and 2% TRP New Asia)

I looked at Vanguard and TRP.

Vanguard Intl Explorer is of course closed. The TRP small cap international fund has an ER near 1.2%. I can put up with that but the turnover was about 90%last year and I don't like that for a taxable account.

Thanks,

MB

 

[LOL!]

FSCOX
DRIDX
MIDAX (a load fund)
An article: http://moneycentral.msn.com/content/P144142.asp with some opinions.
Another article: http://news.morningstar.com/article/article.asp?id=155722

 

[Spanky]

International small stocks may have greater potential return over its larger counterparts, higer alpha and lower correlation (0.6) to S&P 500.

Fidelity International Small Cap Opportunities Fund (FSCOX): expense ratio = 1.4%. (not cheap)

 

[mb]

Thanks,

MB

 

[hkw_12]

I own an international small cap fund from Oppenheimer: OSMAX.  Morningstar gives this fund five stars.

Henry

 

[JustCurious]

LZSMX is an international small cap fund, and it returned an average annual return of 19.8% over the last five years. This compares to 11.7% for the U.S. Total Stock Market (VTSMX), and 15.2% for the U.S. Small Cap Index (NAESX). I'm not suggesting that the next five years will produce the same returns, but clearly you would have been better off including international small cap in your portfolio for the last five years.

 

[Nords]

C'mon, guys-- you're focused on all the five-letter tickers.

I would welcome any advice/suggestions/opinions on:

(1) The benefits of international small cap exposure? How important is it?
(2) A good vehicle to get international small cap exposure? (It would be in a taxable account.)

It's not "important" unless you feel it should be part of your asset allocation. Small-cap stocks can grow faster than large caps and an international stock's performance can be boosted by a falling dollar.

Having said that, the demise of small-cap stocks has been predicted for at least three years and international companies may not have the same degree of financial honesty seen in domestic ones. (Considering the low standards of most domestic financial reporting, international stocks are like going from 19th-century Boston to Dodge City.) The dollar may also rise (or at least stop falling) which would adversely affect an international stock's performance. And small-cap stocks can be much more volatile than larger caps.

Wisdomtree's International Small-cap Index (DLS) celebrates its first birthday next week, up 40% (forty percent, not a typo) over the last year on a 0.60% ER...

 

[wildcat]

Ok VG Intl Explorer is closed. Skip all of the above high exp fund offerings and go with a low cost ETF:

Spider Intl Small Cap ETF - GWX .60 bp

Better than all of the above on a tax basis - ETF structure is pretty solid in terms of tax liability. Downside is that it is great to DCA small amounts in ETFs b/c you pay brokerage fees to buy. Still say it is a much better route than the active funds.

 

[wildcat]

Damn Nords, you beat me to the 2nd one.

 

[ats5g]

there's also SPDR S&P International Small Cap ETF (GWX)

 

[Nords]

Damn Nords, you beat me to the 2nd one.

I've been sitting on the sidelines waiting to see how it does, so I think it beat all of us...

 

[LOL!]

DLS and GWX did not exist when this thread was started.

I own DLS as well through recent purchases. It will probably be more tax-efficient than any of the int'l small cap actively managed funds. But it has almost no trading volume, so always use a limit order to buy and/or look at Level II quote before entering an order. It is program-traded so you can get snookered if you don't watch out -- particularly at market open.

GWX has even lower trading volume than DLS. So much lower that I would not use it unless I was desperate.

Oh, all small cap international (value) is up 40% over the last year. Get some.

(OSMAX, MIDAX, VINEX are closed to new investors, but may be available in a 401k plan)