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IWM vs. SCHD: What’s The Difference?

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

Introduction To Mutual Funds
Introduction To Mutual Funds

The expense ratio of IWM is 0.13 percentage points higher than SCHD’s (0.19% vs. 0.06%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided lower returns than SCHD over the past ten years.

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

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Summary

IWMSCHD
NameiShares Russell 2000 ETFSchwab U.S. Dividend Equity ETF
CategorySmall BlendLarge Value
IssueriSharesSchwab ETFs
AUM66.48B26B
Avg. Return13.52%14.80%
Div. Yield0.86%2.89%
Expense Ratio0.19%0.06%

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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

IWM’s dividend yield is 2.03% lower than that of SCHD (0.86% vs. 2.89%). Also, IWM yielded on average 1.28% less per year over the past decade (13.52% vs. 14.80%). The expense ratio of IWM is 0.13 percentage points higher than SCHD’s (0.19% vs. 0.06%).

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Fund Composition

Industry Exposure

IWM vs. SCHD - Industry Exposure

IWMSCHD
Technology14.21%16.26%
Industrials14.78%18.05%
Energy3.74%1.87%
Communication Services3.79%4.96%
Utilities2.44%0.0%
Healthcare20.3%12.64%
Consumer Defensive3.65%14.04%
Real Estate8.59%0.0%
Financial Services13.76%21.69%
Consumer Cyclical10.99%8.36%
Basic Materials3.74%2.13%

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. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.

SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.

IWM is 7.66% more exposed to the Healthcare sector than SCHD (20.3% vs 12.64%). IWM’s exposure to Industrials and Technology stocks is 3.27% lower and 2.05% lower respectively (14.78% vs. 18.05% and 14.21% vs. 16.26%). In total, Consumer Defensive, Basic Materials, and Energy also make up 6.91% less of the fund’s holdings compared to SCHD (11.13% vs. 18.04%).

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%.

SCHD - Holdings

SCHD HoldingsWeight
Merck & Co Inc4.24%
The Home Depot Inc4.19%
Texas Instruments Inc4.16%
Broadcom Inc4.15%
Amgen Inc4.11%
PepsiCo Inc4.09%
BlackRock Inc4.05%
Pfizer Inc3.97%
Verizon Communications Inc3.96%
Cisco Systems Inc3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

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Risk Analysis

IWMSCHD
Mean Return1.120
R-squared77.730
Std. Deviation18.870
Alpha-5.120
Beta1.230
Sharpe Ratio0.680
Treynor Ratio9.560

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

The Schwab U.S. Dividend Equity ETF (SCHD) has a Treynor Ratio of 0 with a Beta of 0 and a R-squared of 0. Its Mean Return is 0 while SCHD’s Alpha is 0. Furthermore, the fund has a Standard Deviation of 0 and a Sharpe Ratio of 0.

IWM’s Mean Return is 1.12 points higher than that of SCHD and its R-squared is 77.73 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than SCHD. The Alpha and Beta of IWM are 5.12 points lower and 1.23 points higher than SCHD’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. SCHD - Annual Returns

YearIWMSCHD
202019.89%15.11%
201925.42%27.28%
2018-11.02%-5.46%
201714.66%20.88%
201621.36%16.25%
2015-4.33%-0.21%
20144.94%11.66%
201338.85%32.9%
201216.39%11.4%
2011-4.19%0.0%
201026.76%0.0%

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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

IWM vs. SCHD - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$25,95313.52%
SCHD$10,000$28,82314.80%

A $10,000 investment in IWM would have resulted in a final balance of $25,953. This is a profit of $15,953 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

IWM’s CAGR is 1.28 percentage points lower than that of SCHD and as a result, would have yielded $2,870 less on a $10,000 investment. Thus, IWM performed worse than SCHD by 1.28% annually.


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