The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between EMB and SCHA? And which fund is better?
The expense ratio of EMB is 0.35 percentage points higher than SCHA’s (0.39% vs. 0.04%). EMB is mostly comprised of BBB bonds while SCHA has a high exposure to the healthcare sector. Overall, EMB has provided lower returns than SCHA over the past 10 years.
In this article, we’ll compare EMB vs. SCHA. We’ll look at portfolio growth and industry exposure, as well as at their performance and fund composition. Moreover, I’ll also discuss EMB’s and SCHA’s risk metrics, annual returns, and holdings and examine how these affect their overall returns.
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Summary
| EMB | SCHA | |
| Name | iShares J.P. Morgan USD Emerging Markets Bond ETF | Schwab U.S. Small-Cap ETF |
| Category | Emerging Markets Bond | Small Blend |
| Issuer | iShares | Schwab ETFs |
| AUM | 19.76B | 16.51B |
| Avg. Return | 6.43% | 12.62% |
| Div. Yield | 3.85% | 0.98% |
| Expense Ratio | 0.39% | 0.04% |
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
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%.
EMB’s dividend yield is 2.87% higher than that of SCHA (3.85% vs. 0.98%). Also, EMB yielded on average 6.19% less per year over the past decade (6.43% vs. 12.62%). The expense ratio of EMB is 0.35 percentage points higher than SCHA’s (0.39% vs. 0.04%).
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Fund Composition
Holdings
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
| 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
| EMB | SCHA | |
| Mean Return | 0.44 | 1.14 |
| R-squared | 23.34 | 82.26 |
| Std. Deviation | 8.44 | 18.68 |
| Alpha | 0.89 | -4.65 |
| Beta | 1.36 | 1.25 |
| Sharpe Ratio | 0.55 | 0.7 |
| Treynor Ratio | 3.24 | 9.62 |
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Mean Return of 0.44 and a R-squared of 23.34. Its Beta is 1.36 while EMB’s Alpha is 0.89. Furthermore, the fund has a Treynor Ratio of 3.24 and a Standard Deviation of 8.44.
The Schwab U.S. Small-Cap ETF (SCHA) has a Mean Return of 1.14 with a R-squared of 82.26 and a Standard Deviation of 18.68. Its Sharpe Ratio is 0.7 while SCHA’s Alpha is -4.65. Furthermore, the fund has a Beta of 1.25 and a Treynor Ratio of 9.62.
EMB’s Mean Return is 0.70 points lower than that of SCHA and its R-squared is 58.92 points lower. With a Standard Deviation of 8.44, EMB is slightly less volatile than SCHA. The Alpha and Beta of EMB are 5.54 points higher and 0.11 points higher than SCHA’s Alpha and Beta.
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Performance
Annual Returns
| Year | EMB | SCHA |
| 2020 | 5.48% | 19.35% |
| 2019 | 15.57% | 26.54% |
| 2018 | -5.67% | -11.75% |
| 2017 | 9.98% | 15.04% |
| 2016 | 9.41% | 19.88% |
| 2015 | 0.43% | -4.24% |
| 2014 | 6.69% | 6.53% |
| 2013 | -7.42% | 39.59% |
| 2012 | 17.64% | 18.24% |
| 2011 | 7.2% | -2.95% |
| 2010 | 11.47% | 28.31% |
EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% 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 |
| EMB | $10,000 | $17,309 | 6.43% |
| SCHA | $10,000 | $30,035 | 12.62% |
A $10,000 investment in EMB would have resulted in a final balance of $17,309. This is a profit of $7,309 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.43%.
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%.
EMB’s CAGR is 6.19 percentage points lower than that of SCHA and as a result, would have yielded $12,726 less on a $10,000 investment. Thus, EMB performed worse than SCHA by 6.19% annually.
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