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IWM vs. SCHB: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between IWM and SCHB? And which fund is better?

The expense ratio of IWM is 0.16 percentage points higher than SCHB’s (0.19% vs. 0.03%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided lower returns than SCHB over the past ten years.

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

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Summary

IWMSCHB
NameiShares Russell 2000 ETFSchwab U.S. Broad Market ETF
CategorySmall BlendLarge Blend
IssueriSharesSchwab ETFs
AUM66.48B21.44B
Avg. Return13.52%14.43%
Div. Yield0.86%1.39%
Expense Ratio0.19%0.03%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.

IWM’s dividend yield is 0.53% lower than that of SCHB (0.86% vs. 1.39%). Also, IWM yielded on average 0.91% less per year over the past decade (13.52% vs. 14.43%). The expense ratio of IWM is 0.16 percentage points higher than SCHB’s (0.19% vs. 0.03%).

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Fund Composition

Industry Exposure

IWM vs. SCHB - Industry Exposure

IWMSCHB
Technology14.21%24.15%
Industrials14.78%9.29%
Energy3.74%2.78%
Communication Services3.79%10.52%
Utilities2.44%2.32%
Healthcare20.3%13.37%
Consumer Defensive3.65%5.76%
Real Estate8.59%3.58%
Financial Services13.76%13.88%
Consumer Cyclical10.99%11.9%
Basic Materials3.74%2.45%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.

SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.

IWM is 6.93% more exposed to the Healthcare sector than SCHB (20.3% vs 13.37%). IWM’s exposure to Industrials and Technology stocks is 5.49% higher and 9.94% lower respectively (14.78% vs. 9.29% and 14.21% vs. 24.15%). In total, Consumer Defensive, Basic Materials, and Energy also make up 0.14% more of the fund’s holdings compared to SCHB (11.13% vs. 10.99%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

SCHB - Holdings

SCHB HoldingsWeight
Apple Inc4.86%
Microsoft Corp4.61%
Amazon.com Inc3.33%
Facebook Inc A1.88%
Alphabet Inc A1.66%
Alphabet Inc Class C1.61%
Berkshire Hathaway Inc Class B1.19%
Tesla Inc1.18%
NVIDIA Corp1.13%
JPMorgan Chase & Co1.06%

SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.

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Risk Analysis

IWMSCHB
Mean Return1.121.23
R-squared77.7399.33
Std. Deviation18.8714.12
Alpha-5.12-0.58
Beta1.231.04
Sharpe Ratio0.681
Treynor Ratio9.5613.58

The iShares Russell 2000 ETF (IWM) has a Beta of 1.23 with a Sharpe Ratio of 0.68 and a R-squared of 77.73. Its Standard Deviation is 18.87 while IWM’s Alpha is -5.12. Furthermore, the fund has a Mean Return of 1.12 and a Treynor Ratio of 9.56.

The Schwab U.S. Broad Market ETF (SCHB) has a Treynor Ratio of 13.58 with a Sharpe Ratio of 1 and a R-squared of 99.33. Its Alpha is -0.58 while SCHB’s Mean Return is 1.23. Furthermore, the fund has a Beta of 1.04 and a Standard Deviation of 14.12.

IWM’s Mean Return is 0.11 points lower than that of SCHB and its R-squared is 21.60 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than SCHB. The Alpha and Beta of IWM are 4.54 points lower and 0.19 points higher than SCHB’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. SCHB - Annual Returns

YearIWMSCHB
202019.89%20.77%
201925.42%30.94%
2018-11.02%-5.25%
201714.66%21.18%
201621.36%12.56%
2015-4.33%0.45%
20144.94%12.67%
201338.85%33.37%
201216.39%16.22%
2011-4.19%1.4%
201026.76%17.1%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2013 was the strongest year for SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.

Portfolio Growth

IWM vs. SCHB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$28,94113.52%
SCHB$10,000$36,35414.43%

A $10,000 investment in IWM would have resulted in a final balance of $28,941. This is a profit of $18,941 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.

IWM’s CAGR is 0.91 percentage points lower than that of SCHB and as a result, would have yielded $7,413 less on a $10,000 investment. Thus, IWM performed worse than SCHB by 0.91% annually.


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