The iShares MSCI EAFE ETF (EFA) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between EFA and SCHG? And which fund is better?
The expense ratio of EFA is 0.28 percentage points higher than SCHG’s (0.32% vs. 0.04%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than SCHG over the past ten years.
In this article, we’ll compare EFA vs. SCHG. We’ll look at performance and risk metrics, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss EFA’s and SCHG’s industry exposure, annual returns, and fund composition and examine how these affect their overall returns.
Summary
| EFA | SCHG | |
| Name | iShares MSCI EAFE ETF | Schwab U.S. Large-Cap Growth ETF |
| Category | Foreign Large Blend | Large Growth |
| Issuer | iShares | Schwab ETFs |
| AUM | 56.77B | 15.16B |
| Avg. Return | 6.47% | 17.81% |
| Div. Yield | 2.28% | 0.43% |
| 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. 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%.
EFA’s dividend yield is 1.85% higher than that of SCHG (2.28% vs. 0.43%). Also, EFA yielded on average 11.34% less per year over the past decade (6.47% vs. 17.81%). The expense ratio of EFA is 0.28 percentage points higher than SCHG’s (0.32% vs. 0.04%).
Fund Composition
Industry Exposure
| EFA | SCHG | |
| Technology | 9.68% | 39.21% |
| Industrials | 15.01% | 3.01% |
| Energy | 3.51% | 0.2% |
| Communication Services | 5.68% | 17.07% |
| Utilities | 3.35% | 0.0% |
| Healthcare | 12.8% | 12.05% |
| Consumer Defensive | 10.56% | 2.15% |
| Real Estate | 3.01% | 1.64% |
| Financial Services | 16.88% | 7.98% |
| Consumer Cyclical | 11.62% | 15.01% |
| Basic Materials | 7.91% | 1.68% |
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. 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%.
EFA is 8.90% more exposed to the Financial Services sector than SCHG (16.88% vs 7.98%). EFA’s exposure to Industrials and Healthcare stocks is 12.00% higher and 0.75% higher respectively (15.01% vs. 3.01% and 12.8% vs. 12.05%). In total, Utilities, Energy, and Communication Services also make up 4.73% less of the fund’s holdings compared to SCHG (12.54% vs. 17.27%).
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%.
| 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
| EFA | SCHG | |
| Mean Return | 0.57 | 1.46 |
| R-squared | 96.78 | 92.92 |
| Std. Deviation | 15.01 | 14.78 |
| Alpha | 0.47 | 1.97 |
| Beta | 0.98 | 1.05 |
| Sharpe Ratio | 0.41 | 1.14 |
| Treynor Ratio | 5.33 | 16.3 |
The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a R-squared of 96.78 and a Mean Return of 0.57. Its Sharpe Ratio is 0.41 while EFA’s Treynor Ratio is 5.33. Furthermore, the fund has a Standard Deviation of 15.01 and a Alpha of 0.47.
The Schwab U.S. Large-Cap Growth ETF (SCHG) has a R-squared of 92.92 with a Beta of 1.05 and a Alpha of 1.97. Its Treynor Ratio is 16.3 while SCHG’s Mean Return is 1.46. Furthermore, the fund has a Sharpe Ratio of 1.14 and a Standard Deviation of 14.78.
EFA’s Mean Return is 0.89 points lower than that of SCHG and its R-squared is 3.86 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than SCHG. The Alpha and Beta of EFA are 1.50 points lower and 0.07 points lower than SCHG’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | SCHG |
| 2020 | 7.92% | 39.13% |
| 2019 | 21.94% | 36.21% |
| 2018 | -13.83% | -1.35% |
| 2017 | 24.94% | 28.04% |
| 2016 | 0.96% | 6.76% |
| 2015 | -0.9% | 3.26% |
| 2014 | -5.04% | 15.74% |
| 2013 | 22.62% | 33.96% |
| 2012 | 17.22% | 17.02% |
| 2011 | -12.18% | -0.67% |
| 2010 | 7.52% | 16.83% |
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 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 |
| EFA | $10,000 | $16,991 | 6.47% |
| SCHG | $10,000 | $47,556 | 17.81% |
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 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%.
EFA’s CAGR is 11.34 percentage points lower than that of SCHG and as a result, would have yielded $30,565 less on a $10,000 investment. Thus, EFA performed worse than SCHG by 11.34% annually.
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