Key Points
IEFA carries a higher yield and even larger asset base than SCHE.
Both funds charge the same low expense ratio but differ in geographic and sector exposure.
IEFA has outperformed SCHE over the past year and in five-year growth of $1,000.
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The Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) and iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) both offer low-cost international diversification, but differ sharply in their regional focus, sector weights, and recent returns.
Both SCHE and IEFA appeal to investors looking outside the U.S., but SCHE targets emerging markets while IEFA zeroes in on developed markets outside the U.S. and Canada. This comparison highlights how their costs, performance, liquidity, and portfolio construction stack up for globally minded investors.
Snapshot (cost & size)
| Metric | SCHE | IEFA |
|---|---|---|
| Issuer | Schwab | IShares |
| Expense ratio | 0.07% | 0.07% |
| 1-yr return (as of 2026-02-04) | 26.1% | 29.0% |
| Dividend yield | 2.8% | 3.4% |
| Beta | 0.87 | 1.01 |
| AUM | $12.2 billion | $173.4 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
Both ETFs are equally affordable on fees, but IEFA offers a moderately higher payout and a much larger pool of assets under management (AUM), which could appeal to those seeking extra liquidity and income.
Performance & risk comparison
| Metric | SCHE | IEFA |
|---|---|---|
| Max drawdown (5 years) | -35.70% | -30.41% |
| Growth of $1,000 over 5 years | $1,027 | $1,338 |
What's inside
IEFA covers more than 2,500 developed-market stocks, with notable sector weights in financial services (22%), industrials (20%), and healthcare (11%). Its top holdings include ASML Holding, Roche Holding, and HSBC Holdings. The fund has been operating for 13.3 years. With no leverage, currency hedging, or ESG overlays, the fund’s strategy is straightforward, aiming to mirror developed markets outside North America.
By contrast, SCHE focuses on emerging economies, with a pronounced tilt toward technology (23%) and financial services (23%). Its largest positions are Taiwan Semiconductor Manufacturing, Tencent Holdings Ltd., and Alibaba Group. This approach means SCHE may offer more exposure to growth-oriented markets, but with higher volatility and a smaller amount of assets under management (AUM) compared to IEFA.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Both the Schwab Emerging Markets Equity ETF (SCHE) and the iShares Core MSCI EAFE ETF (IEFA) are attractive choices for investors seeking international exposure. They offer low expense ratios and comparable one-year returns. Deciding between them comes down to the individual investor’s goals for their portfolio.
IEFA is for those wanting lower risk and volatility due to its focus on developed markets outside North America, and large number of holdings at over 2,500 stocks. Its lower five-year drawdown illustrates this point. The ETF also offers a higher dividend yield for income-oriented investors, and far greater liquidity thanks to its large AUM.
SCHE is for aggressive investors seeking growth. Its larger tilt towards technology stocks compared to IEFA means it has a greater potential to capitalize on the advent of artificial intelligence. However, because it targets emerging markets, SCHE is exposed to greater volatility and political risks.
For long-term investors who prioritize stability and income, IEFA is the better choice. For those who want to emphasize growth stocks, SCHE is the way to go.
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HSBC Holdings is an advertising partner of Motley Fool Money. Robert Izquierdo has positions in ASML, Alibaba Group, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool recommends Alibaba Group, HSBC Holdings, and Roche Holding AG. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
