IWM vs. SCHX: What’s The Difference?

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

The expense ratio of IWM is 0.16 percentage points higher than SCHX’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 SCHX over the past ten years.

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

Summary

IWM SCHX
Name iShares Russell 2000 ETF Schwab U.S. Large-Cap ETF
Category Small Blend Large Blend
Issuer iShares Schwab ETFs
AUM 66.48B 30.89B
Avg. Return 13.52% 14.60%
Div. Yield 0.86% 1.41%
Expense Ratio 0.19% 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. Large-Cap ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.

IWM’s dividend yield is 0.55% lower than that of SCHX (0.86% vs. 1.41%). Also, IWM yielded on average 1.08% less per year over the past decade (13.52% vs. 14.60%). The expense ratio of IWM is 0.16 percentage points higher than SCHX’s (0.19% vs. 0.03%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

IWM vs. SCHX - Industry Exposure

IWM SCHX
Technology 14.21% 25.13%
Industrials 14.78% 8.65%
Energy 3.74% 2.72%
Communication Services 3.79% 11.26%
Utilities 2.44% 2.37%
Healthcare 20.3% 13.04%
Consumer Defensive 3.65% 5.97%
Real Estate 8.59% 3.13%
Financial Services 13.76% 13.82%
Consumer Cyclical 10.99% 11.63%
Basic Materials 3.74% 2.28%

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. Large-Cap ETF (SCHX) has the most exposure to the Technology sector at 25.13%. This is followed by Financial Services and Healthcare at 13.82% and 13.04% respectively. Utilities (2.37%), Energy (2.72%), and Real Estate (3.13%) only make up 8.22% of the fund’s total assets.

SCHX’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.65%, 11.26%, 11.63%, and 13.04%.

IWM is 7.26% more exposed to the Healthcare sector than SCHX (20.3% vs 13.04%). IWM’s exposure to Industrials and Technology stocks is 6.13% higher and 10.92% lower respectively (14.78% vs. 8.65% and 14.21% vs. 25.13%). In total, Consumer Defensive, Basic Materials, and Energy also make up 0.16% more of the fund’s holdings compared to SCHX (11.13% vs. 10.97%).

Holdings

IWM - Holdings

IWM Holdings Weight
AMC Entertainment Holdings Inc Class A 0.52%
Intellia Therapeutics Inc 0.33%
Crocs Inc 0.3%
BlackRock Cash Funds Treasury SL Agency 0.29%
Tenet Healthcare Corp 0.26%
Lattice Semiconductor Corp 0.26%
Tetra Tech Inc 0.25%
II-VI 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%.

SCHX - Holdings

SCHX Holdings Weight
Apple Inc 5.37%
Microsoft Corp 5.1%
Amazon.com Inc 3.69%
Facebook Inc A 2.08%
Alphabet Inc A 1.84%
Alphabet Inc Class C 1.78%
Berkshire Hathaway Inc Class B 1.32%
Tesla Inc 1.31%
NVIDIA Corp 1.25%
JPMorgan Chase & Co 1.18%

SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.

Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

IWM SCHX
Mean Return 1.12 1.24
R-squared 77.73 99.83
Std. Deviation 18.87 13.8
Alpha -5.12 -0.14
Beta 1.23 1.02
Sharpe Ratio 0.68 1.03
Treynor Ratio 9.56 14.06

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

The Schwab U.S. Large-Cap ETF (SCHX) has a R-squared of 99.83 with a Standard Deviation of 13.8 and a Treynor Ratio of 14.06. Its Beta is 1.02 while SCHX’s Alpha is -0.14. Furthermore, the fund has a Mean Return of 1.24 and a Sharpe Ratio of 1.03.

IWM’s Mean Return is 0.12 points lower than that of SCHX and its R-squared is 22.10 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than SCHX. The Alpha and Beta of IWM are 4.98 points lower and 0.21 points higher than SCHX’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

IWM vs. SCHX - Annual Returns

Year IWM SCHX
2020 19.89% 20.9%
2019 25.42% 31.4%
2018 -11.02% -4.52%
2017 14.66% 21.91%
2016 21.36% 11.78%
2015 -4.33% 1.02%
2014 4.94% 13.33%
2013 38.85% 32.54%
2012 16.39% 16.06%
2011 -4.19% 1.61%
2010 26.76% 15.88%

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 SCHX, returning 32.54% on an annual basis. The poorest year for SCHX in the last ten years was 2018, with a yield of -4.52%. Most years the Schwab U.S. Large-Cap ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.33%, 15.88%, and 16.06% respectively.

Portfolio Growth

IWM vs. SCHX - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWM $10,000 $28,941 13.52%
SCHX $10,000 $36,987 14.60%

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 SCHX, the end total would have been $36,987. This equates to a $26,987 profit over 10 years and a compound annual growth rate (CAGR) of 14.60%.

IWM’s CAGR is 1.08 percentage points lower than that of SCHX and as a result, would have yielded $8,046 less on a $10,000 investment. Thus, IWM performed worse than SCHX by 1.08% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply