The iShares MSCI EAFE ETF (EFA) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between EFA and SCHA? And which fund is better?
The expense ratio of EFA is 0.28 percentage points higher than SCHA’s (0.32% vs. 0.04%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare EFA vs. SCHA. We’ll look at fund composition and holdings, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss EFA’s and SCHA’s portfolio growth, industry exposure, and performance and examine how these affect their overall returns.
Summary
| EFA | SCHA | |
| Name | iShares MSCI EAFE ETF | Schwab U.S. Small-Cap ETF |
| Category | Foreign Large Blend | Small Blend |
| Issuer | iShares | Schwab ETFs |
| AUM | 56.77B | 16.51B |
| Avg. Return | 6.47% | 12.62% |
| Div. Yield | 2.28% | 0.98% |
| Expense Ratio | 0.32% | 0.04% |
The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
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%.
EFA’s dividend yield is 1.30% higher than that of SCHA (2.28% vs. 0.98%). Also, EFA yielded on average 6.15% less per year over the past decade (6.47% vs. 12.62%). The expense ratio of EFA is 0.28 percentage points higher than SCHA’s (0.32% vs. 0.04%).
Fund Composition
Industry Exposure
| EFA | SCHA | |
| Technology | 9.68% | 14.91% |
| Industrials | 15.01% | 15.37% |
| Energy | 3.51% | 3.35% |
| Communication Services | 5.68% | 3.5% |
| Utilities | 3.35% | 1.83% |
| Healthcare | 12.8% | 16.5% |
| Consumer Defensive | 10.56% | 3.75% |
| Real Estate | 3.01% | 7.83% |
| Financial Services | 16.88% | 14.49% |
| Consumer Cyclical | 11.62% | 14.48% |
| Basic Materials | 7.91% | 3.98% |
The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.
EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.
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%.
EFA is 2.39% more exposed to the Financial Services sector than SCHA (16.88% vs 14.49%). EFA’s exposure to Industrials and Healthcare stocks is 0.36% lower and 3.70% lower respectively (15.01% vs. 15.37% and 12.8% vs. 16.5%). In total, Utilities, Energy, and Communication Services also make up 3.86% more of the fund’s holdings compared to SCHA (12.54% vs. 8.68%).
Holdings
| EFA Holdings | Weight |
| Nestle SA | 2.11% |
| ASML Holding NV | 1.69% |
| Roche Holding AG | 1.55% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.28% |
| Novartis AG | 1.19% |
| Toyota Motor Corp | 1.09% |
| AstraZeneca PLC | 0.92% |
| Unilever PLC | 0.9% |
| AIA Group Ltd | 0.88% |
| SAP SE | 0.86% |
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
| SCHA Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.67% |
| Caesars Entertainment Inc | 0.51% |
| Cloudflare Inc | 0.48% |
| NovoCure Ltd | 0.45% |
| Plug Power Inc | 0.41% |
| 10x Genomics Inc Ordinary Shares – Class A | 0.34% |
| GameStop Corp Class A | 0.28% |
| RH | 0.27% |
| 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%.
Risk Analysis
| EFA | SCHA | |
| Mean Return | 0.57 | 1.14 |
| R-squared | 96.78 | 82.26 |
| Std. Deviation | 15.01 | 18.68 |
| Alpha | 0.47 | -4.65 |
| Beta | 0.98 | 1.25 |
| Sharpe Ratio | 0.41 | 0.7 |
| Treynor Ratio | 5.33 | 9.62 |
The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a R-squared of 96.78 and a Treynor Ratio of 5.33. Its Mean Return is 0.57 while EFA’s Sharpe Ratio is 0.41. Furthermore, the fund has a Beta of 0.98 and a Alpha of 0.47.
The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Standard Deviation of 18.68 and a Mean Return of 1.14. Its R-squared is 82.26 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a Alpha of -4.65 and a Treynor Ratio of 9.62.
EFA’s Mean Return is 0.57 points lower than that of SCHA and its R-squared is 14.52 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than SCHA. The Alpha and Beta of EFA are 5.12 points higher and 0.27 points lower than SCHA’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | SCHA |
| 2020 | 7.92% | 19.35% |
| 2019 | 21.94% | 26.54% |
| 2018 | -13.83% | -11.75% |
| 2017 | 24.94% | 15.04% |
| 2016 | 0.96% | 19.88% |
| 2015 | -0.9% | -4.24% |
| 2014 | -5.04% | 6.53% |
| 2013 | 22.62% | 39.59% |
| 2012 | 17.22% | 18.24% |
| 2011 | -12.18% | -2.95% |
| 2010 | 7.52% | 28.31% |
EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $16,991 | 6.47% |
| SCHA | $10,000 | $30,035 | 12.62% |
A $10,000 investment in EFA would have resulted in a final balance of $16,991. This is a profit of $6,991 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
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%.
EFA’s CAGR is 6.15 percentage points lower than that of SCHA and as a result, would have yielded $13,044 less on a $10,000 investment. Thus, EFA performed worse than SCHA by 6.15% annually.
