The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Schwab U.S. Large-Cap ETF (SCHX) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SCHX is a Schwab ETFs Large Blend fund. So, what’s the difference between VWO and SCHX? And which fund is better?
The expense ratio of VWO is 0.07 percentage points higher than SCHX’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 SCHX over the past ten years.
In this article, we’ll compare VWO vs. SCHX. We’ll look at performance and risk metrics, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VWO’s and SCHX’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||Schwab U.S. Large-Cap ETF|
|Category||Diversified Emerging Mkts||Large Blend|
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 ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.
VWO’s dividend yield is 0.57% higher than that of SCHX (1.98% vs. 1.41%). Also, VWO yielded on average 8.81% less per year over the past decade (5.79% vs. 14.60%). The expense ratio of VWO is 0.07 percentage points higher than SCHX’s (0.1% vs. 0.03%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
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 ETF (SCHX) has the most exposure to the Technology sector at 25.13%. This is followed by Financial Services and Healthcare at 13.82% and 13.04% respectively. Utilities (2.37%), Energy (2.72%), and Real Estate (3.13%) only make up 8.22% of the fund’s total assets.
SCHX’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.65%, 11.26%, 11.63%, and 13.04%.
VWO is 4.33% more exposed to the Financial Services sector than SCHX (18.15% vs 13.82%). VWO’s exposure to Technology and Consumer Cyclical stocks is 8.07% lower and 4.47% higher respectively (17.06% vs. 25.13% and 16.1% vs. 11.63%). In total, Real Estate, Healthcare, and Energy also make up 4.95% less of the fund’s holdings compared to SCHX (13.94% vs. 18.89%).
|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%.
|Facebook Inc A||2.08%|
|Alphabet Inc A||1.84%|
|Alphabet Inc Class C||1.78%|
|Berkshire Hathaway Inc Class B||1.32%|
|JPMorgan Chase & Co||1.18%|
SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.
Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.
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 Treynor Ratio of 3.14. Its Beta is 1.06 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Mean Return of 0.45 and a Alpha of -1.36.
The Schwab U.S. Large-Cap ETF (SCHX) has a Standard Deviation of 13.8 with a Sharpe Ratio of 1.03 and a Beta of 1.02. Its Treynor Ratio is 14.06 while SCHX’s R-squared is 99.83. Furthermore, the fund has a Alpha of -0.14 and a Mean Return of 1.24.
VWO’s Mean Return is 0.79 points lower than that of SCHX and its R-squared is 18.14 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than SCHX. The Alpha and Beta of VWO are 1.22 points lower and 0.04 points higher than SCHX’s Alpha and Beta.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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 SCHX, returning 32.54% on an annual basis. The poorest year for SCHX in the last ten years was 2018, with a yield of -4.52%. Most years the Schwab U.S. Large-Cap ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.33%, 15.88%, and 16.06% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 SCHX, the end total would have been $36,987. This equates to a $26,987 profit over 10 years and a compound annual growth rate (CAGR) of 14.60%.
VWO’s CAGR is 8.81 percentage points lower than that of SCHX and as a result, would have yielded $23,372 less on a $10,000 investment. Thus, VWO performed worse than SCHX by 8.81% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.