The iShares MSCI Emerging Markets ETF (EEM) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between EEM and SCHA? And which fund is better?
The expense ratio of EEM is 0.64 percentage points higher than SCHA’s (0.68% vs. 0.04%). EEM also has a higher exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare EEM vs. SCHA. We’ll look at fund composition and holdings, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss EEM’s and SCHA’s performance, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||Schwab U.S. Small-Cap ETF|
|Category||Diversified Emerging Mkts||Small Blend|
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
EEM’s dividend yield is 0.50% higher than that of SCHA (1.48% vs. 0.98%). Also, EEM yielded on average 7.15% less per year over the past decade (5.47% vs. 12.62%). The expense ratio of EEM is 0.64 percentage points higher than SCHA’s (0.68% vs. 0.04%).
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The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
EEM is 6.45% more exposed to the Technology sector than SCHA (21.36% vs 14.91%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 3.90% higher and 0.68% higher respectively (18.39% vs. 14.49% and 15.16% vs. 14.48%). In total, Utilities, Industrials, and Healthcare also make up 22.04% less of the fund’s holdings compared to SCHA (11.66% vs. 33.70%).
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|Penn National Gaming Inc||0.27%|
|Axon Enterprise Inc||0.27%|
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
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The iShares MSCI Emerging Markets ETF (EEM) has a Standard Deviation of 17.79 with a R-squared of 83.5 and a Mean Return of 0.38. Its Sharpe Ratio is 0.22 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Alpha of -2.33 and a Beta of 1.08.
The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Alpha of -4.65 and a Mean Return of 1.14. Its R-squared is 82.26 while SCHA’s Standard Deviation is 18.68. Furthermore, the fund has a Sharpe Ratio of 0.7 and a Treynor Ratio of 9.62.
EEM’s Mean Return is 0.76 points lower than that of SCHA and its R-squared is 1.24 points higher. With a Standard Deviation of 17.79, EEM is slightly less volatile than SCHA. The Alpha and Beta of EEM are 2.32 points higher and 0.17 points lower than SCHA’s Alpha and Beta.
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EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EEM would have resulted in a final balance of $13,437. This is a profit of $3,437 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
EEM’s CAGR is 7.15 percentage points lower than that of SCHA and as a result, would have yielded $16,598 less on a $10,000 investment. Thus, EEM performed worse than SCHA by 7.15% annually.
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