IEMG Offers Broader Emerging Markets Exposure Than SCHE

The iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) stands out for its larger assets under management (AUM), greater number of holdings, and higher recent returns, while the Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) maintains a marginal cost advantage and nearly identical sector exposure.

Both iShares Core MSCI Emerging Markets ETF and Schwab Emerging Markets Equity ETF aim to give investors diversified access to equities from emerging markets, but differ in scale, cost, and portfolio breadth. This comparison explores how each ETF stacks up on expenses, returns, risk, holdings, and practical trading factors to help clarify which may better match different investor 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.

Schwab Emerging Markets Equity ETF is slightly more affordable at 0.07% in annual expenses compared to iShares Core MSCI Emerging Markets ETF’s 0.09%, while their dividend yields are nearly identical at 2.9% for SCHE and 2.8% for IEMG, making cost and income differences negligible for most investors.

Performance & risk comparison

What's inside

iShares Core MSCI Emerging Markets ETF covers a wide swath of emerging market equities, spanning 2,679 stocks and tracking technology (26%), financial services (21%), and consumer discretionary (12%) sectors. Its top holdings concentrate in Taiwan Semiconductor Manufacturing (TWSE:2330) at 9.8%, Tencent Holdings (SEHK:700) at 4.4%, and Samsung Electronics (KOSE:A005930) at 3.0%. The fund has a track record over 13.2 years and is designed to offer comprehensive market exposure without notable quirks or overlays.

Schwab Emerging Markets Equity ETF holds 2,171 names and tilts similarly by sector, with technology and financial services each at 22%, and consumer discretionary at 14%. Its largest positions are Taiwan Semiconductor Manufacturing at 11.8%, Tencent Holdings at 5.1%, and Alibaba Group Holding (SEHK:9988) at 3.5%, indicating a slightly heavier concentration in the top names compared to IEMG.

What this means for investors

Both funds provide broad exposure to emerging markets, but IEMG offers greater diversification by number of holdings and a larger AUM, which may appeal to investors seeking scale and liquidity. SCHE, on the other hand, offers a marginally lower expense ratio, which could be attractive for cost-conscious investors. Both ETFs maintain similar sector allocations and top holdings.

The choice may come down to a preference for broader coverage and fund size versus a slight cost advantage. Not only does IEMG offer more stocks in total, but it also spreads its allocations among its top holdings in a way that reduces the impact of any one company. On the other hand, SCHE puts a heavier emphasis on its top holdings but reduces the overall technology exposure compared to IEMG.

Glossary

ETF: Exchange-traded fund; a pooled investment fund traded on stock exchanges, holding a basket of assets.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund divided by its current price, shown as a percentage.
Beta: A measure of a fund's volatility compared to the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Holdings: The individual securities or assets owned by a fund.
Sector allocation: The distribution of a fund’s investments across different industries or economic sectors.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Emerging markets: Countries with developing economies and financial markets, often offering higher growth and risk.

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

Jeff Santoro has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing and Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.