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SCHX vs. EEM: What’s The Difference?

The Schwab U.S. Large-Cap ETF (SCHX) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between SCHX and EEM? And which fund is better?

The expense ratio of SCHX is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%). SCHX also has a higher exposure to the technology sector and a lower standard deviation. Overall, SCHX has provided higher returns than EEM over the past ten years.

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

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Summary

SCHXEEM
NameSchwab U.S. Large-Cap ETFiShares MSCI Emerging Markets ETF
CategoryLarge BlendDiversified Emerging Mkts
IssuerSchwab ETFsiShares
AUM30.89B30.33B
Avg. Return14.60%5.47%
Div. Yield1.41%1.48%
Expense Ratio0.03%0.68%

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%.

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

SCHX’s dividend yield is 0.07% lower than that of EEM (1.41% vs. 1.48%). Also, SCHX yielded on average 9.13% more per year over the past decade (14.60% vs. 5.47%). The expense ratio of SCHX is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%).

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Fund Composition

Industry Exposure

SCHX vs. EEM - Industry Exposure

SCHXEEM
Technology25.13%21.36%
Industrials8.65%4.61%
Energy2.72%5.17%
Communication Services11.26%11.76%
Utilities2.37%1.99%
Healthcare13.04%5.06%
Consumer Defensive5.97%5.45%
Real Estate3.13%1.98%
Financial Services13.82%18.39%
Consumer Cyclical11.63%15.16%
Basic Materials2.28%9.07%

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%.

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

SCHX is 3.77% more exposed to the Technology sector than EEM (25.13% vs 21.36%). SCHX’s exposure to Financial Services and Healthcare stocks is 4.57% lower and 7.98% higher respectively (13.82% vs. 18.39% and 13.04% vs. 5.06%). In total, Utilities, Energy, and Real Estate also make up 0.92% less of the fund’s holdings compared to EEM (8.22% vs. 9.14%).

Holdings

SCHX - Holdings

SCHX HoldingsWeight
Apple Inc5.37%
Microsoft Corp5.1%
Amazon.com Inc3.69%
Facebook Inc A2.08%
Alphabet Inc A1.84%
Alphabet Inc Class C1.78%
Berkshire Hathaway Inc Class B1.32%
Tesla Inc1.31%
NVIDIA Corp1.25%
JPMorgan Chase & Co1.18%

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%.

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

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Risk Analysis

SCHXEEM
Mean Return1.240.38
R-squared99.8383.5
Std. Deviation13.817.79
Alpha-0.14-2.33
Beta1.021.08
Sharpe Ratio1.030.22
Treynor Ratio14.062.22

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

The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Treynor Ratio of 2.22 and a Standard Deviation of 17.79. Its Sharpe Ratio is 0.22 while EEM’s Alpha is -2.33. Furthermore, the fund has a R-squared of 83.5 and a Beta of 1.08.

SCHX’s Mean Return is 0.86 points higher than that of EEM and its R-squared is 16.33 points higher. With a Standard Deviation of 13.8, SCHX is slightly less volatile than EEM. The Alpha and Beta of SCHX are 2.19 points higher and 0.06 points lower than EEM’s Alpha and Beta.

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Performance

Annual Returns

SCHX vs. EEM - Annual Returns

YearSCHXEEM
202020.9%17.56%
201931.4%17.67%
2018-4.52%-14.98%
201721.91%36.42%
201611.78%10.51%
20151.02%-15.41%
201413.33%-2.82%
201332.54%-3.14%
201216.06%17.32%
20111.61%-18.87%
201015.88%15.93%

SCHX had its best year in 2013 with an annual return of 32.54%. SCHX’s worst year over the past decade yielded -4.52% and occurred in 2018. In most years the Schwab U.S. Large-Cap ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.33%, 15.88%, and 16.06% respectively.

The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.

Portfolio Growth

SCHX vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHX$10,000$36,98714.60%
EEM$10,000$13,4375.47%

A $10,000 investment in SCHX would have resulted in a final balance of $36,987. This is a profit of $26,987 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.60%.

With a $10,000 investment in EEM, the end total would have been $13,437. This equates to a $3,437 profit over 10 years and a compound annual growth rate (CAGR) of 5.47%.

SCHX’s CAGR is 9.13 percentage points higher than that of EEM and as a result, would have yielded $23,550 more on a $10,000 investment. Thus, SCHX outperformed EEM by 9.13% annually.


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