The iShares MSCI Emerging Markets ETF (EEM) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between EEM and SCHB? And which fund is better?
The expense ratio of EEM is 0.65 percentage points higher than SCHB’s (0.68% vs. 0.03%). EEM also has a lower exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than SCHB over the past ten years.
In this article, we’ll compare EEM vs. SCHB. We’ll look at fund composition and holdings, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss EEM’s and SCHB’s performance, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||Schwab U.S. Broad Market ETF|
|Category||Diversified Emerging Mkts||Large 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. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
EEM’s dividend yield is 0.09% higher than that of SCHB (1.48% vs. 1.39%). Also, EEM yielded on average 8.96% less per year over the past decade (5.47% vs. 14.43%). The expense ratio of EEM is 0.65 percentage points higher than SCHB’s (0.68% vs. 0.03%).
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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. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
EEM is 2.79% less exposed to the Technology sector than SCHB (21.36% vs 24.15%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 4.51% higher and 3.26% higher respectively (18.39% vs. 13.88% and 15.16% vs. 11.9%). In total, Utilities, Industrials, and Healthcare also make up 13.32% less of the fund’s holdings compared to SCHB (11.66% vs. 24.98%).
|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%.
|Facebook Inc A||1.88%|
|Alphabet Inc A||1.66%|
|Alphabet Inc Class C||1.61%|
|Berkshire Hathaway Inc Class B||1.19%|
|JPMorgan Chase & Co||1.06%|
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
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The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a R-squared of 83.5 and a Sharpe Ratio of 0.22. Its Treynor Ratio is 2.22 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Alpha of -2.33 and a Beta of 1.08.
The Schwab U.S. Broad Market ETF (SCHB) has a Mean Return of 1.23 with a Sharpe Ratio of 1 and a Beta of 1.04. Its Standard Deviation is 14.12 while SCHB’s Treynor Ratio is 13.58. Furthermore, the fund has a R-squared of 99.33 and a Alpha of -0.58.
EEM’s Mean Return is 0.85 points lower than that of SCHB and its R-squared is 15.83 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than SCHB. The Alpha and Beta of EEM are 1.75 points lower and 0.04 points higher than SCHB’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 SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% 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 SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
EEM’s CAGR is 8.96 percentage points lower than that of SCHB and as a result, would have yielded $22,917 less on a $10,000 investment. Thus, EEM performed worse than SCHB by 8.96% annually.
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