IEFA vs. SCHP: What’s The Difference?

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

The expense ratio of IEFA is 0.02 percentage points higher than SCHP’s (0.07% vs. 0.05%). IEFA also has a high exposure to the industrials sector while SCHP is mostly comprised of AAA bonds. Overall, IEFA has provided higher returns than SCHP over the past ten years.

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

Summary

IEFA SCHP
Name iShares Core MSCI EAFE ETF Schwab U.S. TIPS ETF
Category Foreign Large Blend Inflation-Protected Bond
Issuer iShares Schwab ETFs
AUM 95.78B 18.41B
Avg. Return 5.79% 3.92%
Div. Yield 2.28% 1.97%
Expense Ratio 0.07% 0.05%

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. 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%.

IEFA’s dividend yield is 0.31% higher than that of SCHP (2.28% vs. 1.97%). Also, IEFA yielded on average 1.87% more per year over the past decade (5.79% vs. 3.92%). The expense ratio of IEFA is 0.02 percentage points higher than SCHP’s (0.07% vs. 0.05%).

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Fund Composition

Holdings

IEFA - Holdings

IEFA Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

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%.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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.

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Performance

Annual Returns

IEFA vs. SCHP - Annual Returns

Year IEFA SCHP
2020 8.55% 10.94%
2019 22.67% 8.36%
2018 -14.2% -1.31%
2017 26.42% 2.95%
2016 1.36% 4.6%
2015 0.53% -1.5%
2014 -4.82% 3.56%
2013 23.73% -8.66%
2012 0.0% 6.83%
2011 0.0% 13.38%
2010 0.0% 0.0%

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 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

IEFA vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
SCHP $10,000 $13,032 3.92%

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 SCHP, the end total would have been $13,032. This equates to a $3,032 profit over 7 years and a compound annual growth rate (CAGR) of 3.92%.

IEFA’s CAGR is 1.87 percentage points higher than that of SCHP and as a result, would have yielded $976 more on a $10,000 investment. Thus, IEFA outperformed SCHP by 1.87% annually.


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