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?
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.
|Name||iShares Russell 2000 ETF||Schwab U.S. Dividend Equity ETF|
|Category||Small Blend||Large Value|
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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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%).
|AMC Entertainment Holdings Inc Class A||0.52%|
|Intellia Therapeutics Inc||0.33%|
|BlackRock Cash Funds Treasury SL Agency||0.29%|
|Tenet Healthcare Corp||0.26%|
|Lattice Semiconductor Corp||0.26%|
|Tetra Tech Inc||0.25%|
|EastGroup Properties Inc||0.24%|
|Arrowhead Pharmaceuticals Inc||0.24%|
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%.
|Merck & Co Inc||4.24%|
|The Home Depot Inc||4.19%|
|Texas Instruments Inc||4.16%|
|Verizon Communications Inc||3.96%|
|Cisco Systems Inc||3.96%|
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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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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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.
|Fund||Initial Balance||Final Balance||CAGR|
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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