The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between VWO and SCHD? And which fund is better?
The expense ratio of VWO is 0.04 percentage points higher than SCHD’s (0.1% vs. 0.06%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than SCHD over the past ten years.
In this article, we’ll compare VWO vs. SCHD. We’ll look at portfolio growth and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VWO’s and SCHD’s fund composition, performance, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||Schwab U.S. Dividend Equity ETF|
|Category||Diversified Emerging Mkts||Large Value|
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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.
VWO’s dividend yield is 0.91% lower than that of SCHD (1.98% vs. 2.89%). Also, VWO yielded on average 9.01% less per year over the past decade (5.79% vs. 14.80%). The expense ratio of VWO is 0.04 percentage points higher than SCHD’s (0.1% vs. 0.06%).
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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. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.
SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.
VWO is 3.54% less exposed to the Financial Services sector than SCHD (18.15% vs 21.69%). VWO’s exposure to Technology and Consumer Cyclical stocks is 0.80% higher and 7.74% higher respectively (17.06% vs. 16.26% and 16.1% vs. 8.36%). In total, Real Estate, Healthcare, and Energy also make up 0.57% less of the fund’s holdings compared to SCHD (13.94% vs. 14.51%).
|Tencent Holdings Ltd||5.29%|
|Alibaba Group Holding Ltd Ordinary Shares||4.73%|
|Taiwan Semiconductor Manufacturing Co Ltd||4.58%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||1.7%|
|Reliance Industries Ltd Shs Dematerialised||1.06%|
|Naspers Ltd Class N||1.01%|
|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%.
|Merck & Co Inc||4.24%|
|The Home Depot Inc||4.19%|
|Texas Instruments Inc||4.16%|
|Verizon Communications Inc||3.96%|
|Cisco Systems Inc||3.96%|
SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.
PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a R-squared of 81.69 with a Mean Return of 0.45 and a Treynor Ratio of 3.14. Its Standard Deviation is 17.64 while VWO’s Beta is 1.06. Furthermore, the fund has a Alpha of -1.36 and a Sharpe Ratio of 0.27.
The Schwab U.S. Dividend Equity ETF (SCHD) has a Mean Return of 0 with a Alpha of 0 and a Standard Deviation of 0. Its R-squared is 0 while SCHD’s Treynor Ratio is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.
VWO’s Mean Return is 0.45 points higher than that of SCHD and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than SCHD. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than SCHD’s Alpha and Beta.
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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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VWO would have resulted in a final balance of $14,088. This is a profit of $4,088 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.
VWO’s CAGR is 9.01 percentage points lower than that of SCHD and as a result, would have yielded $14,735 less on a $10,000 investment. Thus, VWO performed worse than SCHD by 9.01% annually.
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