The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between VWO and SCHB? And which fund is better?
The expense ratio of VWO is 0.07 percentage points higher than SCHB’s (0.1% vs. 0.03%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than SCHB over the past ten years.
In this article, we’ll compare VWO vs. SCHB. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss VWO’s and SCHB’s performance, fund composition, and annual returns and examine how these affect their overall returns.
Summary
| VWO | SCHB | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Schwab U.S. Broad Market ETF |
| Category | Diversified Emerging Mkts | Large Blend |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 117.28B | 21.44B |
| Avg. Return | 5.79% | 14.43% |
| Div. Yield | 1.98% | 1.39% |
| Expense Ratio | 0.1% | 0.03% |
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. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
VWO’s dividend yield is 0.59% higher than that of SCHB (1.98% vs. 1.39%). Also, VWO yielded on average 8.64% less per year over the past decade (5.79% vs. 14.43%). The expense ratio of VWO is 0.07 percentage points higher than SCHB’s (0.1% vs. 0.03%).
Fund Composition
Industry Exposure
| VWO | SCHB | |
| Technology | 17.06% | 24.15% |
| Industrials | 5.95% | 9.29% |
| Energy | 5.48% | 2.78% |
| Communication Services | 11.41% | 10.52% |
| Utilities | 2.55% | 2.32% |
| Healthcare | 5.33% | 13.37% |
| Consumer Defensive | 5.87% | 5.76% |
| Real Estate | 3.13% | 3.58% |
| Financial Services | 18.15% | 13.88% |
| Consumer Cyclical | 16.1% | 11.9% |
| Basic Materials | 8.98% | 2.45% |
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. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
VWO is 4.27% more exposed to the Financial Services sector than SCHB (18.15% vs 13.88%). VWO’s exposure to Technology and Consumer Cyclical stocks is 7.09% lower and 4.20% higher respectively (17.06% vs. 24.15% and 16.1% vs. 11.9%). In total, Real Estate, Healthcare, and Energy also make up 5.79% less of the fund’s holdings compared to SCHB (13.94% vs. 19.73%).
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%.
| SCHB Holdings | Weight |
| Apple Inc | 4.86% |
| Microsoft Corp | 4.61% |
| Amazon.com Inc | 3.33% |
| Facebook Inc A | 1.88% |
| Alphabet Inc A | 1.66% |
| Alphabet Inc Class C | 1.61% |
| Berkshire Hathaway Inc Class B | 1.19% |
| Tesla Inc | 1.18% |
| NVIDIA Corp | 1.13% |
| JPMorgan Chase & Co | 1.06% |
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
Risk Analysis
| VWO | SCHB | |
| Mean Return | 0.45 | 1.23 |
| R-squared | 81.69 | 99.33 |
| Std. Deviation | 17.64 | 14.12 |
| Alpha | -1.36 | -0.58 |
| Beta | 1.06 | 1.04 |
| Sharpe Ratio | 0.27 | 1 |
| Treynor Ratio | 3.14 | 13.58 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Standard Deviation of 17.64 with a R-squared of 81.69 and a Beta of 1.06. Its Mean Return is 0.45 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Treynor Ratio of 3.14 and a Alpha of -1.36.
The Schwab U.S. Broad Market ETF (SCHB) has a R-squared of 99.33 with a Beta of 1.04 and a Standard Deviation of 14.12. Its Treynor Ratio is 13.58 while SCHB’s Sharpe Ratio is 1. Furthermore, the fund has a Alpha of -0.58 and a Mean Return of 1.23.
VWO’s Mean Return is 0.78 points lower than that of SCHB and its R-squared is 17.64 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than SCHB. The Alpha and Beta of VWO are 0.78 points lower and 0.02 points higher than SCHB’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | SCHB |
| 2020 | 15.32% | 20.77% |
| 2019 | 20.4% | 30.94% |
| 2018 | -14.57% | -5.25% |
| 2017 | 31.38% | 21.18% |
| 2016 | 11.75% | 12.56% |
| 2015 | -15.35% | 0.45% |
| 2014 | 0.6% | 12.67% |
| 2013 | -5.0% | 33.37% |
| 2012 | 18.84% | 16.22% |
| 2011 | -18.68% | 1.4% |
| 2010 | 18.99% | 17.1% |
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 SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $13,615 | 5.79% |
| SCHB | $10,000 | $36,354 | 14.43% |
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 SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
VWO’s CAGR is 8.64 percentage points lower than that of SCHB and as a result, would have yielded $22,739 less on a $10,000 investment. Thus, VWO performed worse than SCHB by 8.64% annually.
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