PruFid Financial Advisors LLC

Foreign Developed Mkts Lrg Cap Funds

There is at least one good reason why most investors should consider investing a portion of their portfolios in foreign stocks:

• Foreign stocks have imperfect correlations with domestic stocks, so including them in a portfolio should improve the portfolio's risk/return characteristics.

For more information on investing overseas, see here.

There are several similar-seeming investment options available. Which is best?

The funds are listed in rough order of our overall preference.

Preferences are listed separately for use in retirement accounts and for taxable accounts.

For a listing of our preferences in other asset classes, see here.

Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)

• Invesco S&P International Developed Momentum ETF (IDMO). E/R: 0.25%. This fund tracks the S&P World Ex-U.S. Momentum Index of non-US Developed-Markets large-cap stocks which have been exhibiting strong risk-adjusted price momentum over the past 12 months (excluding the most recent month).
• iShares MSCI International Developed Momentum Factor ETF (IMTM). E/R: 0.30%. This fund tracks the MSCI World ex USA Momentum Index of large- and mid- cap stocks in developed mkt countries outside the US which have been exhibiting strong risk-adjusted price momentum over the past 6- and 12- month periods.
• AQR International Momentum Style Fund (AIMOX). E/R: 0.55%. This fund invests in large non-US developed mkt momentum stocks (i.e., stocks that have done well over the past 12 months, excluding the most recent month).
• Alpha Architect International Quantitative Momentum ETF (IMOM). E/R: 0.39%. The Alpha Architect International Quantitative Momentum ETF tracks an equal-weighted index of developed-market ex-US stocks with strong and consistent momentum. IMOM targets the 10% of stocks with the highest total return over the last 12 months, excluding the most recent month. The fund also screens for consistency of momentum by excluding stocks with too many negative-return days during the 12-month period. This methodology produces a few dozen holdings which get weighted equally. We don't like that the fund has so relatively few holdings.
• Invesco DWA Developed Markets Momentum ETF (PIZ). E/R: 0.80%. This fund tracks the Dorsey Wright Developed Markets Technical Leaders Index of non-US Developed-Markets large-cap stocks which have been exhibiting strong relative strength.
• DFA International High Relative Profitability Portfolio (DIHRX). E/R: 0.30%. This fund targets stocks in the largest 90% of stocks in non-US developed mkt countries. They then take the most profitable 35% of those stocks and apply roughly market weights to them.
• DFA International High Profitability ETF (DIHP). E/R: 0.29%. This fund targets stocks in the largest 90% of stocks in non-US developed mkt countries. They then take the most profitable 35% of those stocks and apply roughly market weights to them.
• Invesco S&P International Developed Quality ETF (IDHQ). E/R: 0.29%. This fund attempts to track the S&P Quality Developed ex-U.S. LargeMidCap Index. This index starts with the S&P Developed ex-U.S. LargeMidCap Index. It takes the top 20% highest-quality stocks thereof. Then it weights the stocks by the product of their market capitalization and their quality score. This gives a very quality-y portfolio which might have somewhat less turnover than one that didn't include market capitalization in its weighting.
• DFA International Core Equity Market ETF (DFAI). E/R: 0.18%. This fund invests in non-US developed mkt countries while emphasizing stocks with lower market cap, lower relative price, and higher profitability.
• Vanguard Developed Markets Index Fund Admiral Shares (VTMGX). E/R: 0.05%. This fund is an FTSE Developed All Cap ex US Index Fund.
• SPDR Portfolio World ex-US ETF (SPDW). E/R: 0.03%. This ETF tracks the S&P Developed ex-US BMI Index of non-US developed market large-cap stocks, including those in Canada (which are left out of the MSCI EAFE index).
• Vanguard Developed Markets Index ETF (VEA). E/R: 0.03%. This ETF is a share class of the Vanguard Developed Markets Fund (VTMGX). It attempts to track the FTSE Developed All Cap ex US Index.
• BNY Mellon International Equity ETF (BKIE). E/R: 0.04%. This ETF attempts to track the Morningstar Developed Mkts ex-US Large Cap Index of large Developed Mkts companies outside the US.
• iShares MSCI EAFE International Index Fund (MAIIX). E/R: 0.09%. This fund tracks the MSCI EAFE Index of non-North American Developed Market stocks.
• Schwab International Equity ETF (SCHF). E/R: 0.06%. This ETF tracks the FTSE Developed ex-US Index of large-cap stocks in developed markets outside the US.
• iShares Core MSCI EAFE ETF (IEFA). E/R: 0.07%. This ETF tracks the MSCI EAFE Investable Market Index.
• iShares Edge MSCI Minimum Volatility EAFE ETF (EFAV). E/R: 0.20%. This ETF tracks the MSCI EAFE Minimum Volatility Index.
• Avantis International Equity Fund (AVDEX). E/R: 0.23%. This fund buys non-US developed mkt stocks, with a distinct "tilt" towards those that are smaller, more valuey, and more profitable. As such, this isn't as "style pure" as several of the other funds.
• Avantis International Equity ETF (AVDE). E/R: 0.23%. This ETF buys non-US developed mkt stocks, with a distinct "tilt" towards those that are smaller, more valuey, and more profitable. As such, this isn't as "style pure" as several of the other funds.
• DFA Large Cap International Portfolio (DFALX). E/R: 0.17%. This fund invests in large-cap stocks (i.e., top 80% of market capitalization in each country) from developed markets outside of North America. This fund’s target country allocation roughly conforms to the MSCI EAFE index. However, they don’t necessarily buy stocks with the goal of replicating the index. They buy stocks using a sampling methodology, but they attempt to weight each stock according to its market capitalization (like the index does). Their methodology suggests that their pre-expense returns ought to be similar to those of the MSCI EAFE Index. They attempt to add value by not having to slavishly follow the index—thus avoiding certain problems that all true index funds have regarding reconstitution.
• iShares MSCI EAFE Index Fund (EFA). E/R: 0.33%. This ETF tracks the MSCI EAFE index. We see no good reason to buy it in retirement accounts.
• T.Rowe Price International Equity Index Fund (PIEQX). E/R: 0.30%. This fund tracks the FTSE Developed Ex. North America Index of large-cap foreign stocks.
• PIMCO International StocksPLUS TR Strategy Fund Institutional Shares (PISIX). E/R: 0.75%. This is an "enhanced" MSCI EAFE Index Fund (a.k.a., a "synthetic" index fund). It buys MSCI EAFE index derivatives (e.g., futures, swaps, etc.) and invests the remaining cash in short to intermediate term bonds in an attempt to outperform the index. While the expense ratio seems steep, keep in mind that this fund would be immune from foreign tax withholding, which makes its effective expense ratio lower by about 15% of the current yield, when comparing to the other funds here.
• BNY Mellon Intl Stock Index Fund (DIISX). E/R: 0.60%. This is an MSCI EAFE Index Fund.

Taxable Accounts

• Invesco S&P International Developed Momentum ETF (IDMO). E/R: 0.25%. This fund tracks the S&P World Ex-U.S. Momentum Index of non-US Developed-Markets large-cap stocks which have been exhibiting strong risk-adjusted price momentum over the past 12 months (excluding the most recent month).
• iShares MSCI International Developed Momentum Factor ETF (IMTM). E/R: 0.30%. This fund tracks the MSCI World ex USA Momentum Index of large- and mid- cap stocks in developed mkt countries outside the US which have been exhibiting strong risk-adjusted price momentum over the past 6- and 12- month periods. We like that this fund has such a low expense ratio.
• AQR International Momentum Style Fund (AIMOX). E/R: 0.55%. This fund invests in large non-US developed mkt momentum stocks (i.e., stocks that have done well over the past 12 months, excluding the most recent month). This fund attempts to lesson short-term capital gain and dividend distributions.
• Alpha Architect International Quantitative Momentum ETF (IMOM). E/R: 0.39%. The Alpha Architect International Quantitative Momentum ETF tracks an equal-weighted index of developed-market ex-US stocks with strong and consistent momentum. IMOM targets the 10% of stocks with the highest total return over the last 12 months, excluding the most recent month. The fund also screens for consistency of momentum by excluding stocks with too many negative-return days during the 12-month period. This methodology produces a few dozen holdings which get weighted equally. We don't like that the fund has so relatively few holdings.
• Invesco DWA Developed Markets Momentum ETF (PIZ). E/R: 0.80%. This fund tracks the Dorsey Wright Developed Markets Technical Leaders Index of non-US Developed-Markets large-cap stocks which have been exhibiting strong relative strength.
• DFA International High Profitability ETF (DIHP). E/R: 0.29%. This fund targets stocks in the largest 90% of stocks in non-US developed mkt countries. They then take the most profitable 35% of those stocks and apply roughly market weights to them.
• Invesco S&P International Developed Quality ETF (IDHQ). E/R: 0.29%. This fund attempts to track the S&P Quality Developed ex-U.S. LargeMidCap Index. This index starts with the S&P Developed ex-U.S. LargeMidCap Index. It takes the top 20% highest-quality stocks thereof. Then it weights the stocks by the product of their market capitalization and their quality score. This gives a very quality-y portfolio which might have somewhat less turnover than one that didn't include market capitalization in its weighting.
• DFA International Core Equity Market ETF (DFAI). E/R: 0.18%. This fund invests in non-US developed mkt countries while emphasizing stocks with lower market cap, lower relative price, and higher profitability.
• Vanguard Developed Markets Index Fund Admiral Shares (VTMGX). E/R: 0.05%. This fund is an FTSE Developed All Cap ex US Index Fund. There is a $10,000 initial minimum purchase requirement. The existence of an ETF share class should further help it become even more capital gains tax efficient.
• SPDR Portfolio World ex-US ETF (SPDW). E/R: 0.03%. This ETF tracks the S&P Developed ex-US BMI Index of non-US developed market large-cap stocks, including those in Canada (which are left out of the MSCI EAFE index).
• Vanguard Developed Markets Index ETF (VEA). E/R: 0.03%. This ETF is a share class of the Vanguard Developed Markets Index Fund (VTMGX). It attempts to track the FTSE Developed All Cap ex US Index.
• Schwab International Equity ETF (SCHF). E/R: 0.06%. This ETF tracks the FTSE Developed ex-US Index of large-cap stocks in developed markets outside the US.
• iShares Core MSCI EAFE ETF (IEFA). E/R: 0.07%. This ETF tracks the MSCI EAFE Investable Market Index.
• iShares Edge MSCI Minimum Volatility EAFE ETF (EFAV). E/R: 0.20%. This ETF tracks the MSCI EAFE Minimum Volatility Index.
• BNY Mellon International Equity ETF (BKIE). E/R: 0.04%. This ETF attempts to track the Morningstar Developed Mkts ex-US Large Cap Index of large Developed Mkts companies outside the US.
• Avantis International Equity ETF (AVDE). E/R: 0.23%. This ETF buys non-US developed mkt stocks, with a distinct "tilt" towards those that are smaller, more valuey, and more profitable. As such, this isn't as "style pure" as several of the other funds.
• iShares MSCI EAFE Index Fund (EFA). E/R: 0.32%. This ETF tracks the MSCI EAFE index.

This web page contains the current opinions of Eric E. Haas at the time it is written—and such opinions are subject to change without notice. This web page is intended to serve two purposes:

• To educate the public; and
• To provide disclosure of Mr. Haas' opinions to prospective clients. We believe that prospective clients are well-served by being made aware of what they are buying—and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.

No investor should invest solely on the basis of information listed here. Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, PruFid recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser. If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.