The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between VWO and SCHP? And which fund is better?

The expense ratio of VWO is 0.05 percentage points higher than SCHP’s (0.1% vs. 0.05%). VWO also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, VWO has provided higher returns than SCHP over the past ten years.

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

Summary

VWOSCHP
NameVanguard FTSE Emerging Markets Index Fund ETF SharesSchwab U.S. TIPS ETF
CategoryDiversified Emerging MktsInflation-Protected Bond
IssuerVanguardSchwab ETFs
AUM117.28B18.41B
Avg. Return5.79%3.92%
Div. Yield1.98%1.97%
Expense Ratio0.1%0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

VWO’s dividend yield is 0.01% higher than that of SCHP (1.98% vs. 1.97%). Also, VWO yielded on average 1.87% more per year over the past decade (5.79% vs. 3.92%). The expense ratio of VWO is 0.05 percentage points higher than SCHP’s (0.1% vs. 0.05%).

Fund Composition

Holdings

VWO - Holdings

VWO HoldingsWeight
Tencent Holdings Ltd5.29%
Alibaba Group Holding Ltd Ordinary Shares4.73%
Taiwan Semiconductor Manufacturing Co Ltd4.58%
Meituan1.88%
Taiwan Semiconductor Manufacturing Co Ltd ADR1.7%
Reliance Industries Ltd Shs Dematerialised1.06%
Naspers Ltd Class N1.01%
Vale SA0.92%
Infosys Ltd0.91%
China Construction Bank Corp Class H0.84%

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%.

SCHP - Holdings

SCHP Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

VWOSCHP
Mean Return0.450.28
R-squared81.6966.16
Std. Deviation17.644.32
Alpha-1.36-0.5
Beta1.061.17
Sharpe Ratio0.270.64
Treynor Ratio3.142.31

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Alpha of -1.36 with a Sharpe Ratio of 0.27 and a R-squared of 81.69. Its Treynor Ratio is 3.14 while VWO’s Standard Deviation is 17.64. Furthermore, the fund has a Mean Return of 0.45 and a Beta of 1.06.

The Schwab U.S. TIPS ETF (SCHP) has a Mean Return of 0.28 with a Treynor Ratio of 2.31 and a R-squared of 66.16. Its Sharpe Ratio is 0.64 while SCHP’s Beta is 1.17. Furthermore, the fund has a Alpha of -0.5 and a Standard Deviation of 4.32.

VWO’s Mean Return is 0.17 points higher than that of SCHP and its R-squared is 15.53 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than SCHP. The Alpha and Beta of VWO are 0.86 points lower and 0.11 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

VWO vs. SCHP - Annual Returns

YearVWOSCHP
202015.32%10.94%
201920.4%8.36%
2018-14.57%-1.31%
201731.38%2.95%
201611.75%4.6%
2015-15.35%-1.5%
20140.6%3.56%
2013-5.0%-8.66%
201218.84%6.83%
2011-18.68%13.38%
201018.99%0.0%

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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

VWO vs. SCHP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$13,6155.79%
SCHP$10,000$14,4183.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

VWO’s CAGR is 1.87 percentage points higher than that of SCHP and as a result, would have yielded $803 less on a $10,000 investment. Thus, VWO outperformed SCHP by 1.87% annually.

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