Want To Take Your Portfolio Around the World? These ETFs May Help

Both the Schwab International Equity ETF (NYSEMKT:SCHF) and iShares MSCI ACWI ex U.S. ETF (NASDAQ:ACWX) are designed as core international equity ETFs, offering exposure to emerging and developed markets outside the United States. This comparison examines their costs, performance, risk, portfolio makeup, and other notable differences to help investors understand which may better fit their needs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

SCHF is significantly more affordable, charging just a 0.03% expense ratio versus ACWX’s 0.32%, and it also pays a higher dividend yield of 3.3% compared to 2.7%.

Performance & risk comparison

What's inside

Operating for nearly 18 years, the iShares MSCI ACWI ex U.S. ETF holds 1,796 companies, providing broad exposure to non-U.S. stocks, with its top three sector holdings being financial services (24%), industrials (14%), and technology (14%). Its largest positions are Taiwan Semiconductor Manufacturing (2330.TW), Tencent Holdings Ltd (0700.HK), and ASML Holding Nv (AMS:ASML).

A little over a year younger, the Schwab International Equity ETF is similarly diversified, with 1,498 holdings, but its third-highest sector allocation is consumer discretion. Its top three holdings are ASML Holding, Samsung Electronics Ltd (005930.KS), and Roche Holding Par Ag (SIX:ROG.SW).

What this means for investors

With both ETFs excluding U.S. stocks from their holdings, investors based in the U.S. should be aware of the risks associated with investing in these ETFs compared to U.S.-centered funds.

International stocks can move very differently from American stocks and exhibit volatility that U.S. investors may not be used to, as those foreign stocks may move more closely in line with the relevant country’s economic and political structures and events. U.S. investors may want to keep an eye on relevant events in the relevant foreign country or continent to better understand the companies and the stock associated with each ETF.

Investors should also be aware that both ETFs pay dividends semi-annually, so those accustomed to quarterly payouts would need to adjust to the slower pace. But overall, SCHF has a slight advantage over ACWX, as it has posted both higher one- and five-year returns, a lower expense ratio, and a higher dividend yield.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual dividends paid by a fund or stock divided by its current share price.
Beta: Measure of an investment’s volatility compared with the overall market; above 1 is more volatile.
AUM: Assets under management; the total market value of all assets a fund manages.
Max drawdown: Largest peak-to-trough decline in value over a specific period, showing worst historical loss.
Growth of $1,000: Illustration showing how a $1,000 investment would have increased or decreased over time.
Developed markets: Countries with mature, high-income economies and well-established financial markets.
Emerging markets: Countries with developing economies and markets that may offer higher growth and higher risk.
Sector tilt: When a fund has relatively higher exposure to certain industries compared with the broader market.
Leverage (in funds): Use of borrowed money or derivatives to amplify returns, which also increases risk.
Currency hedge: Strategy used by funds to reduce the impact of exchange-rate movements on investment returns.

For more guidance on ETF investing, check out the full guide at this link.

Adé Hennis has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.