The iShares MSCI Emerging Markets ETF (EEM) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between EEM and SCHG? And which fund is better?
The expense ratio of EEM is 0.64 percentage points higher than SCHG’s (0.68% vs. 0.04%). EEM also has a lower exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than SCHG over the past ten years.
In this article, we’ll compare EEM vs. SCHG. We’ll look at annual returns and performance, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss EEM’s and SCHG’s industry exposure, fund composition, and risk metrics and examine how these affect their overall returns.
Summary
| EEM | SCHG | |
| Name | iShares MSCI Emerging Markets ETF | Schwab U.S. Large-Cap Growth ETF |
| Category | Diversified Emerging Mkts | Large Growth |
| Issuer | iShares | Schwab ETFs |
| AUM | 30.33B | 15.16B |
| Avg. Return | 5.47% | 17.81% |
| Div. Yield | 1.48% | 0.43% |
| Expense Ratio | 0.68% | 0.04% |
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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.
EEM’s dividend yield is 1.05% higher than that of SCHG (1.48% vs. 0.43%). Also, EEM yielded on average 12.34% less per year over the past decade (5.47% vs. 17.81%). The expense ratio of EEM is 0.64 percentage points higher than SCHG’s (0.68% vs. 0.04%).
Fund Composition
Industry Exposure
| EEM | SCHG | |
| Technology | 21.36% | 39.21% |
| Industrials | 4.61% | 3.01% |
| Energy | 5.17% | 0.2% |
| Communication Services | 11.76% | 17.07% |
| Utilities | 1.99% | 0.0% |
| Healthcare | 5.06% | 12.05% |
| Consumer Defensive | 5.45% | 2.15% |
| Real Estate | 1.98% | 1.64% |
| Financial Services | 18.39% | 7.98% |
| Consumer Cyclical | 15.16% | 15.01% |
| Basic Materials | 9.07% | 1.68% |
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. Large-Cap Growth ETF (SCHG) has the most exposure to the Technology sector at 39.21%. This is followed by Communication Services and Consumer Cyclical at 17.07% and 15.01% respectively. Energy (0.2%), Real Estate (1.64%), and Basic Materials (1.68%) only make up 3.52% of the fund’s total assets.
SCHG’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 2.15%, 3.01%, 7.98%, 12.05%, and 15.01%.
EEM is 17.85% less exposed to the Technology sector than SCHG (21.36% vs 39.21%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 10.41% higher and 0.15% higher respectively (18.39% vs. 7.98% and 15.16% vs. 15.01%). In total, Utilities, Industrials, and Healthcare also make up 3.40% less of the fund’s holdings compared to SCHG (11.66% vs. 15.06%).
Holdings
| EEM Holdings | Weight |
| 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% |
| Meituan | 1.24% |
| Vale SA | 1.04% |
| Naspers Ltd Class N | 1.04% |
| Reliance Industries Ltd Shs Dematerialised | 0.97% |
| Infosys Ltd | 0.92% |
| 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%.
| SCHG Holdings | Weight |
| Apple Inc | 11.49% |
| Microsoft Corp | 10.91% |
| Amazon.com Inc | 7.89% |
| Facebook Inc A | 4.45% |
| Alphabet Inc A | 3.93% |
| Alphabet Inc Class C | 3.82% |
| Tesla Inc | 2.8% |
| NVIDIA Corp | 2.67% |
| Visa Inc Class A | 2.12% |
| UnitedHealth Group Inc | 2.02% |
SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.
Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.
Risk Analysis
| EEM | SCHG | |
| Mean Return | 0.38 | 1.46 |
| R-squared | 83.5 | 92.92 |
| Std. Deviation | 17.79 | 14.78 |
| Alpha | -2.33 | 1.97 |
| Beta | 1.08 | 1.05 |
| Sharpe Ratio | 0.22 | 1.14 |
| Treynor Ratio | 2.22 | 16.3 |
The iShares MSCI Emerging Markets ETF (EEM) has a Sharpe Ratio of 0.22 with a Alpha of -2.33 and a R-squared of 83.5. Its Standard Deviation is 17.79 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Mean Return of 0.38 and a Beta of 1.08.
The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Treynor Ratio of 16.3 with a Sharpe Ratio of 1.14 and a Standard Deviation of 14.78. Its Beta is 1.05 while SCHG’s R-squared is 92.92. Furthermore, the fund has a Alpha of 1.97 and a Mean Return of 1.46.
EEM’s Mean Return is 1.08 points lower than that of SCHG and its R-squared is 9.42 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than SCHG. The Alpha and Beta of EEM are 4.30 points lower and 0.03 points higher than SCHG’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | SCHG |
| 2020 | 17.56% | 39.13% |
| 2019 | 17.67% | 36.21% |
| 2018 | -14.98% | -1.35% |
| 2017 | 36.42% | 28.04% |
| 2016 | 10.51% | 6.76% |
| 2015 | -15.41% | 3.26% |
| 2014 | -2.82% | 15.74% |
| 2013 | -3.14% | 33.96% |
| 2012 | 17.32% | 17.02% |
| 2011 | -18.87% | -0.67% |
| 2010 | 15.93% | 16.83% |
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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $13,437 | 5.47% |
| SCHG | $10,000 | $47,556 | 17.81% |
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 SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.
EEM’s CAGR is 12.34 percentage points lower than that of SCHG and as a result, would have yielded $34,119 less on a $10,000 investment. Thus, EEM performed worse than SCHG by 12.34% annually.
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