You can argue about which one is correct or better, but that misses the point. When Vanguard and BlackRock's (BLK - Get Report) iShares were both following MSCI benchmarks, you could easily choose one vendor for your emerging markets exposure and the other for developed markets exposure. Since they had the same benchmark, you did not have to worry about overlap or underlap.
If you try to mix the two once Vanguard's changes are complete, you will end up with either a double weighting in South Korea or a zero weighting in South Korea. The same is true when choosing large-cap Value and Large Cap Growth funds. If they are not tracking benchmarks from the same index provider, then there is likely to be overlap and underlap of individual stocks.
Should you be concerned?
Strategic asset allocators, institutional investors, and ETF strategists should be concerned. For these groups, the possibility of overlap/underlap is very real and needs to be understood. Switching models from MSCI to FTSE or CRSP will require thoughtful analysis and clear divisions.Technical and tactical traders should be cognizant of the major differences, but they probably do not need to be overly concerned. In fact, the differences could be helpful if different performance characteristics develop. These groups could buy an MSCI-based ETF this month and use a FTSE-based ETF on the next trade. For day traders, liquidity and asset class representation are among the most important factors. These index changes are not likely to be a concern unless the trading vehicles experience a drop in liquidity. Should you fire Vanguard as your fund vendor? Like many difficult questions, the answer to this one falls into the "it depends" category. If you trade or invest in Vanguard's sector ETFs, then these changes will not affect you. For "style-box" funds, Vanguard provides lineups from three separate index providers: Russell, S&P and MSCI (see