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EEM vs. SCHD: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between EEM and SCHD? And which fund is better?

The expense ratio of EEM is 0.62 percentage points higher than SCHD’s (0.68% vs. 0.06%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than SCHD over the past ten years.

In this article, we’ll compare EEM vs. SCHD. We’ll look at risk metrics and performance, as well as at their annual returns and fund composition. Moreover, I’ll also discuss EEM’s and SCHD’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

EEMSCHD
NameiShares MSCI Emerging Markets ETFSchwab U.S. Dividend Equity ETF
CategoryDiversified Emerging MktsLarge Value
IssueriSharesSchwab ETFs
AUM30.33B26B
Avg. Return5.47%14.80%
Div. Yield1.48%2.89%
Expense Ratio0.68%0.06%

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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

EEM’s dividend yield is 1.41% lower than that of SCHD (1.48% vs. 2.89%). Also, EEM yielded on average 9.33% less per year over the past decade (5.47% vs. 14.80%). The expense ratio of EEM is 0.62 percentage points higher than SCHD’s (0.68% vs. 0.06%).

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Fund Composition

Industry Exposure

EEM vs. SCHD - Industry Exposure

EEMSCHD
Technology21.36%16.26%
Industrials4.61%18.05%
Energy5.17%1.87%
Communication Services11.76%4.96%
Utilities1.99%0.0%
Healthcare5.06%12.64%
Consumer Defensive5.45%14.04%
Real Estate1.98%0.0%
Financial Services18.39%21.69%
Consumer Cyclical15.16%8.36%
Basic Materials9.07%2.13%

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. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.

SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.

EEM is 5.10% more exposed to the Technology sector than SCHD (21.36% vs 16.26%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 3.30% lower and 6.80% higher respectively (18.39% vs. 21.69% and 15.16% vs. 8.36%). In total, Utilities, Industrials, and Healthcare also make up 19.03% less of the fund’s holdings compared to SCHD (11.66% vs. 30.69%).

Holdings

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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%.

SCHD - Holdings

SCHD HoldingsWeight
Merck & Co Inc4.24%
The Home Depot Inc4.19%
Texas Instruments Inc4.16%
Broadcom Inc4.15%
Amgen Inc4.11%
PepsiCo Inc4.09%
BlackRock Inc4.05%
Pfizer Inc3.97%
Verizon Communications Inc3.96%
Cisco Systems Inc3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

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Risk Analysis

EEMSCHD
Mean Return0.380
R-squared83.50
Std. Deviation17.790
Alpha-2.330
Beta1.080
Sharpe Ratio0.220
Treynor Ratio2.220

The iShares MSCI Emerging Markets ETF (EEM) has a Alpha of -2.33 with a Sharpe Ratio of 0.22 and a Treynor Ratio of 2.22. Its Standard Deviation is 17.79 while EEM’s Mean Return is 0.38. Furthermore, the fund has a Beta of 1.08 and a R-squared of 83.5.

The Schwab U.S. Dividend Equity ETF (SCHD) has a Beta of 0 with a Alpha of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while SCHD’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

EEM’s Mean Return is 0.38 points higher than that of SCHD and its R-squared is 83.50 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than SCHD. The Alpha and Beta of EEM are 2.33 points lower and 1.08 points higher than SCHD’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. SCHD - Annual Returns

YearEEMSCHD
202017.56%15.11%
201917.67%27.28%
2018-14.98%-5.46%
201736.42%20.88%
201610.51%16.25%
2015-15.41%-0.21%
2014-2.82%11.66%
2013-3.14%32.9%
201217.32%11.4%
2011-18.87%0.0%
201015.93%0.0%

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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

EEM vs. SCHD - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$14,1175.47%
SCHD$10,000$28,82314.80%

A $10,000 investment in EEM would have resulted in a final balance of $14,117. This is a profit of $4,117 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

EEM’s CAGR is 9.33 percentage points lower than that of SCHD and as a result, would have yielded $14,706 less on a $10,000 investment. Thus, EEM performed worse than SCHD by 9.33% annually.


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