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.
|Name||iShares MSCI EAFE ETF||Schwab U.S. Large-Cap Growth ETF|
|Category||Foreign Large Blend||Large Growth|
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%).
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%).
|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
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%.
|Facebook Inc A||4.45%|
|Alphabet Inc A||3.93%|
|Alphabet Inc Class C||3.82%|
|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%.
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.
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.