The iShares MSCI EAFE ETF (EFA) and the Schwab U.S. Large-Cap ETF (SCHX) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and SCHX is a Schwab ETFs Large Blend fund. So, what’s the difference between EFA and SCHX? And which fund is better?
The expense ratio of EFA is 0.29 percentage points higher than SCHX’s (0.32% vs. 0.03%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than SCHX over the past ten years.
In this article, we’ll compare EFA vs. SCHX. We’ll look at performance and industry exposure, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss EFA’s and SCHX’s annual returns, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Schwab U.S. Large-Cap ETF|
|Category||Foreign Large Blend||Large Blend|
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 ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.
EFA’s dividend yield is 0.87% higher than that of SCHX (2.28% vs. 1.41%). Also, EFA yielded on average 8.13% less per year over the past decade (6.47% vs. 14.60%). The expense ratio of EFA is 0.29 percentage points higher than SCHX’s (0.32% vs. 0.03%).
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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 ETF (SCHX) has the most exposure to the Technology sector at 25.13%. This is followed by Financial Services and Healthcare at 13.82% and 13.04% respectively. Utilities (2.37%), Energy (2.72%), and Real Estate (3.13%) only make up 8.22% of the fund’s total assets.
SCHX’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.65%, 11.26%, 11.63%, and 13.04%.
EFA is 3.06% more exposed to the Financial Services sector than SCHX (16.88% vs 13.82%). EFA’s exposure to Industrials and Healthcare stocks is 6.36% higher and 0.24% lower respectively (15.01% vs. 8.65% and 12.8% vs. 13.04%). In total, Utilities, Energy, and Communication Services also make up 3.81% less of the fund’s holdings compared to SCHX (12.54% vs. 16.35%).
|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||2.08%|
|Alphabet Inc A||1.84%|
|Alphabet Inc Class C||1.78%|
|Berkshire Hathaway Inc Class B||1.32%|
|JPMorgan Chase & Co||1.18%|
SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.
Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.
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The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a Alpha of 0.47 and a Treynor Ratio of 5.33. Its Sharpe Ratio is 0.41 while EFA’s Beta is 0.98. Furthermore, the fund has a Mean Return of 0.57 and a R-squared of 96.78.
The Schwab U.S. Large-Cap ETF (SCHX) has a Sharpe Ratio of 1.03 with a Standard Deviation of 13.8 and a Beta of 1.02. Its R-squared is 99.83 while SCHX’s Treynor Ratio is 14.06. Furthermore, the fund has a Alpha of -0.14 and a Mean Return of 1.24.
EFA’s Mean Return is 0.67 points lower than that of SCHX and its R-squared is 3.05 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than SCHX. The Alpha and Beta of EFA are 0.61 points higher and 0.04 points lower than SCHX’s Alpha and Beta.
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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 SCHX, returning 32.54% on an annual basis. The poorest year for SCHX in the last ten years was 2018, with a yield of -4.52%. Most years the Schwab U.S. Large-Cap ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.33%, 15.88%, and 16.06% 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 SCHX, the end total would have been $36,987. This equates to a $26,987 profit over 10 years and a compound annual growth rate (CAGR) of 14.60%.
EFA’s CAGR is 8.13 percentage points lower than that of SCHX and as a result, would have yielded $19,996 less on a $10,000 investment. Thus, EFA performed worse than SCHX by 8.13% annually.
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