The iShares Core MSCI EAFE ETF (IEFA) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between IEFA and SCHA? And which fund is better?
The expense ratio of IEFA is 0.03 percentage points higher than SCHA’s (0.07% vs. 0.04%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare IEFA vs. SCHA. We’ll look at fund composition and annual returns, as well as at their risk metrics and performance. Moreover, I’ll also discuss IEFA’s and SCHA’s holdings, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Schwab U.S. Small-Cap ETF|
|Category||Foreign Large Blend||Small Blend|
The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.
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%.
IEFA’s dividend yield is 1.30% higher than that of SCHA (2.28% vs. 0.98%). Also, IEFA yielded on average 6.84% less per year over the past decade (5.79% vs. 12.62%). The expense ratio of IEFA is 0.03 percentage points higher than SCHA’s (0.07% vs. 0.04%).
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The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.
IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.
The Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
IEFA is 0.95% more exposed to the Industrials sector than SCHA (16.32% vs 15.37%). IEFA’s exposure to Financial Services and Healthcare stocks is 1.42% higher and 4.49% lower respectively (15.91% vs. 14.49% and 12.01% vs. 16.5%). In total, Utilities, Real Estate, and Communication Services also make up 0.07% less of the fund’s holdings compared to SCHA (13.09% vs. 13.16%).
|ASML Holding NV||1.43%|
|Roche Holding AG||1.31%|
|LVMH Moet Hennessy Louis Vuitton SE||1.08%|
|Toyota Motor Corp||0.92%|
|AIA Group Ltd||0.74%|
IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.
Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|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%.
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IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in SCHA, the end total would have been $18,750. This equates to a $8,750 profit over 7 years and a compound annual growth rate (CAGR) of 12.62%.
IEFA’s CAGR is 6.84 percentage points lower than that of SCHA and as a result, would have yielded $4,742 less on a $10,000 investment. Thus, IEFA performed worse than SCHA by 6.84% annually.
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