The iShares MSCI EAFE ETF (EFA) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between EFA and SCHP? And which fund is better?

The expense ratio of EFA is 0.27 percentage points higher than SCHP’s (0.32% vs. 0.05%). EFA also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than SCHP over the past ten years.

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

Summary

EFASCHP
NameiShares MSCI EAFE ETFSchwab U.S. TIPS ETF
CategoryForeign Large BlendInflation-Protected Bond
IssueriSharesSchwab ETFs
AUM56.77B18.41B
Avg. Return6.47%3.92%
Div. Yield2.28%1.97%
Expense Ratio0.32%0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

EFA’s dividend yield is 0.31% higher than that of SCHP (2.28% vs. 1.97%). Also, EFA yielded on average 2.55% more per year over the past decade (6.47% vs. 3.92%). The expense ratio of EFA is 0.27 percentage points higher than SCHP’s (0.32% vs. 0.05%).

Fund Composition

Holdings

EFA - Holdings

EFA HoldingsWeight
Nestle SA2.11%
ASML Holding NV1.69%
Roche Holding AG1.55%
LVMH Moet Hennessy Louis Vuitton SE1.28%
Novartis AG1.19%
Toyota Motor Corp1.09%
AstraZeneca PLC0.92%
Unilever PLC0.9%
AIA Group Ltd0.88%
SAP SE0.86%

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%.

SCHP - Holdings

SCHP Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

EFASCHP
Mean Return0.570.28
R-squared96.7866.16
Std. Deviation15.014.32
Alpha0.47-0.5
Beta0.981.17
Sharpe Ratio0.410.64
Treynor Ratio5.332.31

The iShares MSCI EAFE ETF (EFA) has a Sharpe Ratio of 0.41 with a Treynor Ratio of 5.33 and a R-squared of 96.78. Its Alpha is 0.47 while EFA’s Beta is 0.98. Furthermore, the fund has a Mean Return of 0.57 and a Standard Deviation of 15.01.

The Schwab U.S. TIPS ETF (SCHP) has a Standard Deviation of 4.32 with a Mean Return of 0.28 and a Sharpe Ratio of 0.64. Its Alpha is -0.5 while SCHP’s R-squared is 66.16. Furthermore, the fund has a Treynor Ratio of 2.31 and a Beta of 1.17.

EFA’s Mean Return is 0.29 points higher than that of SCHP and its R-squared is 30.62 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than SCHP. The Alpha and Beta of EFA are 0.97 points higher and 0.19 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

EFA vs. SCHP - Annual Returns

YearEFASCHP
20207.92%10.94%
201921.94%8.36%
2018-13.83%-1.31%
201724.94%2.95%
20160.96%4.6%
2015-0.9%-1.5%
2014-5.04%3.56%
201322.62%-8.66%
201217.22%6.83%
2011-12.18%13.38%
20107.52%0.0%

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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

EFA vs. SCHP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EFA$10,000$16,9916.47%
SCHP$10,000$14,4183.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

EFA’s CAGR is 2.55 percentage points higher than that of SCHP and as a result, would have yielded $2,573 more on a $10,000 investment. Thus, EFA outperformed SCHP by 2.55% annually.

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