The iShares Core MSCI EAFE ETF (IEFA) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between IEFA and SCHG? And which fund is better?
The expense ratio of IEFA is 0.03 percentage points higher than SCHG’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 SCHG over the past ten years.
In this article, we’ll compare IEFA vs. SCHG. We’ll look at portfolio growth and performance, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss IEFA’s and SCHG’s holdings, fund composition, and annual returns and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Schwab U.S. Large-Cap Growth ETF|
|Category||Foreign Large Blend||Large Growth|
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. 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%.
IEFA’s dividend yield is 1.85% higher than that of SCHG (2.28% vs. 0.43%). Also, IEFA yielded on average 12.02% less per year over the past decade (5.79% vs. 17.81%). The expense ratio of IEFA is 0.03 percentage points higher than SCHG’s (0.07% vs. 0.04%).
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. 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%.
IEFA is 13.31% more exposed to the Industrials sector than SCHG (16.32% vs 3.01%). IEFA’s exposure to Financial Services and Healthcare stocks is 7.93% higher and 0.04% lower respectively (15.91% vs. 7.98% and 12.01% vs. 12.05%). In total, Utilities, Real Estate, and Communication Services also make up 5.62% less of the fund’s holdings compared to SCHG (13.09% vs. 18.71%).
|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%.
|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%.
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 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 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 SCHG, the end total would have been $30,541. This equates to a $20,541 profit over 7 years and a compound annual growth rate (CAGR) of 17.81%.
IEFA’s CAGR is 12.02 percentage points lower than that of SCHG and as a result, would have yielded $16,533 less on a $10,000 investment. Thus, IEFA performed worse than SCHG by 12.02% annually.
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