The Schwab International Equity ETF (SCHF) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. SCHF is a Schwab ETFs Foreign Large Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between SCHF and QUAL? And which fund is better?
The expense ratio of SCHF is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%). SCHF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, SCHF has provided lower returns than QUAL over the past 7 years.
In this article, we’ll compare SCHF vs. QUAL. We’ll look at holdings and portfolio growth, as well as at their annual returns and performance. Moreover, I’ll also discuss SCHF’s and QUAL’s industry exposure, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||Schwab International Equity ETF||iShares MSCI USA Quality Factor ETF|
|Category||Foreign Large Blend||Large Blend|
The Schwab International Equity ETF (SCHF) is a Foreign Large Blend fund that is issued by Schwab ETFs. It currently has 26.99B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 2.16% with an expense ratio of 0.06%.
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
SCHF’s dividend yield is 0.87% higher than that of QUAL (2.16% vs. 1.29%). Also, SCHF yielded on average 6.99% less per year over the past decade (6.43% vs. 13.42%). The expense ratio of SCHF is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%).
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).
The Schwab International Equity ETF (SCHF) has the most exposure to the Financial Services sector at 17.85%. This is followed by Industrials and Technology at 14.86% and 11.55% respectively. Real Estate (3.17%), Energy (4.23%), and Communication Services (5.65%) only make up 13.05% of the fund’s total assets.
SCHF’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Consumer Cyclical, Healthcare, and Technology stocks at 8.26%, 9.41%, 10.87%, 11.05%, and 11.55%.
The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
SCHF is 1.98% more exposed to the Financial Services sector than QUAL (17.85% vs 15.87%). SCHF’s exposure to Industrials and Technology stocks is 5.64% higher and 10.97% lower respectively (14.86% vs. 9.22% and 11.55% vs. 22.52%). In total, Real Estate, Energy, and Communication Services also make up 3.35% less of the fund’s holdings compared to QUAL (13.05% vs. 16.40%).
|Samsung Electronics Co Ltd||1.6%|
|ASML Holding NV||1.29%|
|Roche Holding AG||1.24%|
|Toyota Motor Corp||1.02%|
|LVMH Moet Hennessy Louis Vuitton SE||0.93%|
|Shopify Inc A||0.78%|
SCHF’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.66%, 1.6%, 1.29%, 1.24%, and 1.02%.
LVMH Moet Hennessy Louis Vuitton SE (0.93%), Novartis AG (0.92%), and Shopify Inc A (0.78%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the SCHF’s holdings at 0.75% and 0.74%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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).
The Schwab International Equity ETF (SCHF) has a Beta of 0.99 with a Standard Deviation of 15.08 and a Treynor Ratio of 5.39. Its R-squared is 98.16 while SCHF’s Alpha is 0.53. Furthermore, the fund has a Sharpe Ratio of 0.42 and a Mean Return of 0.58.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Sharpe Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Beta is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Standard Deviation of 0.
SCHF’s Mean Return is 0.58 points higher than that of QUAL and its R-squared is 98.16 points higher. With a Standard Deviation of 15.08, SCHF is slightly more volatile than QUAL. The Alpha and Beta of SCHF are 0.53 points higher and 0.99 points higher than QUAL’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).
SCHF had its best year in 2017 with an annual return of 25.83%. SCHF’s worst year over the past decade yielded -14.39% and occurred in 2018. In most years the Schwab International Equity ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.88%, 8.6%, and 9.86% respectively.
The year 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in SCHF would have resulted in a final balance of $13,865. This is a profit of $3,865 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.43%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
SCHF’s CAGR is 6.99 percentage points lower than that of QUAL and as a result, would have yielded $9,386 less on a $10,000 investment. Thus, SCHF performed worse than QUAL by 6.99% annually.
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.