Schwab International Equity ETF vs iShares Emerging Markets ETF

Schwab International Equity ETF (NYSEMKT:SCHF) offers investors low-cost exposure to developed non-U.S. economies, while iShares MSCI Emerging Markets ETF (NYSEMKT:EEM) targets high-growth developing markets with a significantly higher fee structure and different risk profile.

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Broadening a portfolio with international stocks can mitigate domestic risk, but the choice between developed and emerging markets involves balancing costs and volatility. This analysis examines how these two funds compare across key metrics, including their underlying sector exposures and historical total returns.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Schwab fund is remarkably more affordable, carrying an expense ratio of 0.03%, which is far lower than the 0.72% fee charged by the iShares fund. Additionally, the Schwab fund provides a higher payout with a 3.1% dividend yield.

Performance & risk comparison

What's inside

Schwab International Equity ETF tracks developed markets outside the U.S., holding 1,443 assets. Its portfolio leans toward Financial Services at 25%, Technology at 17%, and Industrials at 14%. Its largest positions include Samsung Electronics Ltd (KOSE:A005930) at 2.79%, Asml Holding (NASDAQ:ASML) at 2.28%, and Sk Hynix at 2.12%. It was launched in 2009. Schwab International Equity ETF has paid $0.84 per share over the trailing 12 months, which on its recent ~$27.02 share price works out to a 3.1% yield.

iShares MSCI Emerging Markets ETF targets developing nations, providing exposure to 1,186 companies. The portfolio is highly concentrated in Information Technology at 44%, followed by Financials at 19% and Consumer Discretionary at 7%. Its largest positions include Taiwan Semiconductor Manufacturing at 15.97%, Samsung Electronics Ltd at 6.29%, and Sk Hynix at 4.46%. It was launched in 2003. iShares MSCI Emerging Markets ETF has paid $1.11 per share over the trailing 12 months, which on its recent ~$63.96 share price works out to a 1.8% yield.

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Which looks like the better buy

Schwab International Equity ETF is the better default choice for most everyday investors. SCHF offers broad exposure to developed markets outside the U.S. and charges a low annual fee of 0.03%. iShares MSCI Emerging Markets ETF also focuses on emerging markets, but its expense ratio is higher at 0.72%.

If you're simply looking for a core international investment, SCHF may be the ETF for you. However, if you want international exposure and can handle greater volatility, political risk, and concentration, EEM may be the right choice.

While EEM has returned more than SCHF over the last year, that recent advantage doesn't guarantee future performance, so it's important to buy the ETF that best fits your long-term goals.

These ETFs target different markets, so they aren't direct substitutes. SCHF offers low-cost, broad exposure to developed markets, while EEM provides emerging-market exposure with higher risk.

Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.