The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between VWO and SCHG? And which fund is better?
The expense ratio of VWO is 0.06 percentage points higher than SCHG’s (0.1% vs. 0.04%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than SCHG over the past ten years.
In this article, we’ll compare VWO vs. SCHG. We’ll look at performance and fund composition, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss VWO’s and SCHG’s portfolio growth, annual returns, and holdings and examine how these affect their overall returns.
Summary
| VWO | SCHG | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Schwab U.S. Large-Cap Growth ETF |
| Category | Diversified Emerging Mkts | Large Growth |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 117.28B | 15.16B |
| Avg. Return | 5.79% | 17.81% |
| Div. Yield | 1.98% | 0.43% |
| 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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.
VWO’s dividend yield is 1.55% higher than that of SCHG (1.98% vs. 0.43%). Also, VWO yielded on average 12.02% less per year over the past decade (5.79% vs. 17.81%). The expense ratio of VWO is 0.06 percentage points higher than SCHG’s (0.1% vs. 0.04%).
Fund Composition
Industry Exposure
| VWO | SCHG | |
| Technology | 17.06% | 39.21% |
| Industrials | 5.95% | 3.01% |
| Energy | 5.48% | 0.2% |
| Communication Services | 11.41% | 17.07% |
| Utilities | 2.55% | 0.0% |
| Healthcare | 5.33% | 12.05% |
| Consumer Defensive | 5.87% | 2.15% |
| Real Estate | 3.13% | 1.64% |
| Financial Services | 18.15% | 7.98% |
| Consumer Cyclical | 16.1% | 15.01% |
| Basic Materials | 8.98% | 1.68% |
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. Large-Cap Growth ETF (SCHG) has the most exposure to the Technology sector at 39.21%. This is followed by Communication Services and Consumer Cyclical at 17.07% and 15.01% respectively. Energy (0.2%), Real Estate (1.64%), and Basic Materials (1.68%) only make up 3.52% of the fund’s total assets.
SCHG’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 2.15%, 3.01%, 7.98%, 12.05%, and 15.01%.
VWO is 10.17% more exposed to the Financial Services sector than SCHG (18.15% vs 7.98%). VWO’s exposure to Technology and Consumer Cyclical stocks is 22.15% lower and 1.09% higher respectively (17.06% vs. 39.21% and 16.1% vs. 15.01%). In total, Real Estate, Healthcare, and Energy also make up 0.05% more of the fund’s holdings compared to SCHG (13.94% vs. 13.89%).
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%.
| SCHG Holdings | Weight |
| Apple Inc | 11.49% |
| Microsoft Corp | 10.91% |
| Amazon.com Inc | 7.89% |
| Facebook Inc A | 4.45% |
| Alphabet Inc A | 3.93% |
| Alphabet Inc Class C | 3.82% |
| Tesla Inc | 2.8% |
| NVIDIA Corp | 2.67% |
| Visa Inc Class A | 2.12% |
| UnitedHealth Group Inc | 2.02% |
SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.
Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.
Risk Analysis
| VWO | SCHG | |
| Mean Return | 0.45 | 1.46 |
| R-squared | 81.69 | 92.92 |
| Std. Deviation | 17.64 | 14.78 |
| Alpha | -1.36 | 1.97 |
| Beta | 1.06 | 1.05 |
| Sharpe Ratio | 0.27 | 1.14 |
| Treynor Ratio | 3.14 | 16.3 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Sharpe Ratio of 0.27 with a Mean Return of 0.45 and a Treynor Ratio of 3.14. Its R-squared is 81.69 while VWO’s Standard Deviation is 17.64. Furthermore, the fund has a Alpha of -1.36 and a Beta of 1.06.
The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Alpha of 1.97 with a Mean Return of 1.46 and a R-squared of 92.92. Its Standard Deviation is 14.78 while SCHG’s Sharpe Ratio is 1.14. Furthermore, the fund has a Beta of 1.05 and a Treynor Ratio of 16.3.
VWO’s Mean Return is 1.01 points lower than that of SCHG and its R-squared is 11.23 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than SCHG. The Alpha and Beta of VWO are 3.33 points lower and 0.01 points higher than SCHG’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | SCHG |
| 2020 | 15.32% | 39.13% |
| 2019 | 20.4% | 36.21% |
| 2018 | -14.57% | -1.35% |
| 2017 | 31.38% | 28.04% |
| 2016 | 11.75% | 6.76% |
| 2015 | -15.35% | 3.26% |
| 2014 | 0.6% | 15.74% |
| 2013 | -5.0% | 33.96% |
| 2012 | 18.84% | 17.02% |
| 2011 | -18.68% | -0.67% |
| 2010 | 18.99% | 16.83% |
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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $13,615 | 5.79% |
| SCHG | $10,000 | $47,556 | 17.81% |
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 SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.
VWO’s CAGR is 12.02 percentage points lower than that of SCHG and as a result, would have yielded $33,941 less on a $10,000 investment. Thus, VWO performed worse than SCHG by 12.02% annually.
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