More Choices As Market Expands

But there's more. The first diversified foreign small-cap ETF based on an index using business fundamental weightings rather than traditional market-cap sizing is the WisdomTree International SmallCap Dividend Fund (NYSE: DLS). It comes with an expense ratio of 0.58% and sticks to developed markets as well.

Getting dizzy? Wait, there's more.

The new Vanguard foreign small-cap mutual fund and ETF will track an FTSE index that resembles the benchmark used by the iShares FTSE Small-Cap ex-North America ETF (NASDAQ: IFSM). The difference is that Vanguard has decided to pick the purely market-cap-sized weighted FTSE index combining both developed as well as emerging markets.

So besides pricing itself considerably under its competition either way you look at it—mutual funds or ETFs—Vanguard is also throwing in developing markets exposure you won't get in the other indexes. It's a strategy the fund provider has implemented with success in its Total International Stock Market Index Fund (VGTSX) to separate itself from other developed-market-centric competitors such as Fidelity's lower-priced Spartan International Index Fund (FSIIX).

Now, Vanguard is ready to bring the same approach to the small-cap international stock field. Sometime early next year, we'll see a full selection of entries that will give virtually anyone a choice between traditional market-cap sizing and fundamental indexing in either mutual fund or ETF forms.

That's a real advancement considering just about two and a half years ago, investors had nothing to choose from in the indexing universe. Now, you need a scorecard just to keep up. So here you go:

Nontraditional Diversified Small-Cap International Funds

Market-Cap-Sized Small-Cap International Funds

Sources: Companies, Morningstar          *Unofficial estimates based on MSCI category breakdowns, company data

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