The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between VWO and SCHA? And which fund is better?
The expense ratio of VWO is 0.06 percentage points higher than SCHA’s (0.1% vs. 0.04%). VWO also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare VWO vs. SCHA. We’ll look at portfolio growth and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss VWO’s and SCHA’s risk metrics, annual returns, and performance and examine how these affect their overall returns.
Summary
| VWO | SCHA | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Schwab U.S. Small-Cap ETF |
| Category | Diversified Emerging Mkts | Small Blend |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 117.28B | 16.51B |
| Avg. Return | 5.79% | 12.62% |
| Div. Yield | 1.98% | 0.98% |
| Expense Ratio | 0.1% | 0.04% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) is a Diversified Emerging Mkts fund that is issued by Vanguard. It currently has 117.28B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 1.98% with an expense ratio of 0.1%.
The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
VWO’s dividend yield is 1.00% higher than that of SCHA (1.98% vs. 0.98%). Also, VWO yielded on average 6.83% less per year over the past decade (5.79% vs. 12.62%). The expense ratio of VWO is 0.06 percentage points higher than SCHA’s (0.1% vs. 0.04%).
Fund Composition
Industry Exposure
| VWO | SCHA | |
| Technology | 17.06% | 14.91% |
| Industrials | 5.95% | 15.37% |
| Energy | 5.48% | 3.35% |
| Communication Services | 11.41% | 3.5% |
| Utilities | 2.55% | 1.83% |
| Healthcare | 5.33% | 16.5% |
| Consumer Defensive | 5.87% | 3.75% |
| Real Estate | 3.13% | 7.83% |
| Financial Services | 18.15% | 14.49% |
| Consumer Cyclical | 16.1% | 14.48% |
| Basic Materials | 8.98% | 3.98% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has the most exposure to the Financial Services sector at 18.15%. This is followed by Technology and Consumer Cyclical at 17.06% and 16.1% respectively. Real Estate (3.13%), Healthcare (5.33%), and Energy (5.48%) only make up 13.94% of the fund’s total assets.
VWO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.87%, 5.95%, 8.98%, 11.41%, and 16.1%.
The Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
VWO is 3.66% more exposed to the Financial Services sector than SCHA (18.15% vs 14.49%). VWO’s exposure to Technology and Consumer Cyclical stocks is 2.15% higher and 1.62% higher respectively (17.06% vs. 14.91% and 16.1% vs. 14.48%). In total, Real Estate, Healthcare, and Energy also make up 13.74% less of the fund’s holdings compared to SCHA (13.94% vs. 27.68%).
Holdings
| VWO Holdings | Weight |
| Tencent Holdings Ltd | 5.29% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.73% |
| Taiwan Semiconductor Manufacturing Co Ltd | 4.58% |
| Meituan | 1.88% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 1.7% |
| Reliance Industries Ltd Shs Dematerialised | 1.06% |
| Naspers Ltd Class N | 1.01% |
| Vale SA | 0.92% |
| Infosys Ltd | 0.91% |
| China Construction Bank Corp Class H | 0.84% |
VWO’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Taiwan Semiconductor Manufacturing Co Ltd, Meituan, and Taiwan Semiconductor Manufacturing Co Ltd ADR at 5.29%, 4.73%, 4.58%, 1.88%, and 1.7%.
Reliance Industries Ltd Shs Dematerialised (1.06%), Naspers Ltd Class N (1.01%), and Vale SA (0.92%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the VWO’s holdings at 0.91% and 0.84%.
| SCHA Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.67% |
| Caesars Entertainment Inc | 0.51% |
| Cloudflare Inc | 0.48% |
| NovoCure Ltd | 0.45% |
| Plug Power Inc | 0.41% |
| 10x Genomics Inc Ordinary Shares – Class A | 0.34% |
| GameStop Corp Class A | 0.28% |
| RH | 0.27% |
| Penn National Gaming Inc | 0.27% |
| Axon Enterprise Inc | 0.27% |
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
Risk Analysis
| VWO | SCHA | |
| Mean Return | 0.45 | 1.14 |
| R-squared | 81.69 | 82.26 |
| Std. Deviation | 17.64 | 18.68 |
| Alpha | -1.36 | -4.65 |
| Beta | 1.06 | 1.25 |
| Sharpe Ratio | 0.27 | 0.7 |
| Treynor Ratio | 3.14 | 9.62 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Beta of 1.06 and a Standard Deviation of 17.64. Its R-squared is 81.69 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Alpha of -1.36 and a Treynor Ratio of 3.14.
The Schwab U.S. Small-Cap ETF (SCHA) has a Treynor Ratio of 9.62 with a Alpha of -4.65 and a Sharpe Ratio of 0.7. Its Beta is 1.25 while SCHA’s Mean Return is 1.14. Furthermore, the fund has a R-squared of 82.26 and a Standard Deviation of 18.68.
VWO’s Mean Return is 0.69 points lower than that of SCHA and its R-squared is 0.57 points lower. With a Standard Deviation of 17.64, VWO is slightly less volatile than SCHA. The Alpha and Beta of VWO are 3.29 points higher and 0.19 points lower than SCHA’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | SCHA |
| 2020 | 15.32% | 19.35% |
| 2019 | 20.4% | 26.54% |
| 2018 | -14.57% | -11.75% |
| 2017 | 31.38% | 15.04% |
| 2016 | 11.75% | 19.88% |
| 2015 | -15.35% | -4.24% |
| 2014 | 0.6% | 6.53% |
| 2013 | -5.0% | 39.59% |
| 2012 | 18.84% | 18.24% |
| 2011 | -18.68% | -2.95% |
| 2010 | 18.99% | 28.31% |
VWO had its best year in 2017 with an annual return of 31.38%. VWO’s worst year over the past decade yielded -18.68% and occurred in 2011. In most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares provided moderate returns such as in 2014, 2016, and 2020 where annual returns amounted to 0.6%, 11.75%, and 15.32% respectively.
The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $13,615 | 5.79% |
| SCHA | $10,000 | $30,035 | 12.62% |
A $10,000 investment in VWO would have resulted in a final balance of $13,615. This is a profit of $3,615 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
VWO’s CAGR is 6.83 percentage points lower than that of SCHA and as a result, would have yielded $16,420 less on a $10,000 investment. Thus, VWO performed worse than SCHA by 6.83% annually.
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