International ETFs: IEFA vs. SCHE
Key Points
Both ETFs charge the same low expense ratio, but IEFA sports a higher dividend yield.
IEFA is far larger and more liquid, with over $182 billion in assets under management and zero friction for large trades.
SCHE focuses on emerging markets with a tech tilt, while IEFA covers developed markets with heavier exposure to financials and industrials.
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Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) and iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) both offer broad international diversification at a 0.07% expense ratio, but IEFA yields more and covers developed markets, while SCHE leans into emerging markets and technology.
Both SCHE and IEFA are designed as core international holdings, but their approaches differ: SCHE tracks emerging markets, with a strong tilt toward technology and Asia, while IEFA covers developed markets outside the U.S. and Canada, focusing more on financials and industrials. This comparison examines cost, performance, risks, and portfolio makeup to help investors weigh which may fit their needs.
Snapshot (cost & size)
| Metric | SCHE | IEFA |
|---|---|---|
| Issuer | Schwab | iShares |
| Expense ratio | 0.07% | 0.07% |
| 1-yr return (as of 4/20/26) | 38.76% | 33.61% |
| Dividend yield | 2.94% | 3.52% |
| Beta | 0.84 | 0.95 |
| AUM | $11.18 billion | $169.63 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 funds are equally affordable on fees, but IEFA stands out with a higher dividend yield, making it attractive for income-focused investors seeking developed market exposure at no extra cost.
Performance & risk comparison
| Metric | SCHE | IEFA |
|---|---|---|
| Max drawdown (5 y) | (35.73%) | (30.37%) |
| Growth of $1,000 over 5 years | $1,309 | $1,541 |
What's inside
IEFA holds more than 2,600 stocks from developed markets outside the U.S. and Canada, with the largest weights in financial services (23%), industrials (20%), and healthcare (10%). Its top holdings include ASML Holding, Astrazeneca, and HSBC Holdings. The fund has a 13.5-year track record and offers broad diversification across Europe, Japan, and Australia.
SCHE, in contrast, invests in over 2,200 companies from emerging markets, with a heavy focus on technology (27%) and financial services (22%). Its leading positions are Taiwan Semiconductor Manufacturing, Tencent Holdings, and Alibaba Group Holding. Unlike IEFA, SCHE gives investors more exposure to Asia and growth-oriented sectors, but with potentially higher volatility and different regional risks.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Adding international stocks to your portfolio can be a good way to diversify your holdings and mitigate your exposure to volatility in domestic markets. And exchange-traded funds allow you to invest in an entire universe or theme of international stocks, so you don’t have to go digging for information on individual companies. IEFA and SCHE are two approaches to this investment strategy, but they offer very different holdings for investors.
IEFA’s focus on developed markets outside North America theoretically makes it the more conservative play, while SCHE’s emerging-market holdings are more susceptible to volatility, currency fluctuations, and political concerns. However, SCHE’s beta, which is a standard measurement of volatility relative to the S&P 500, is currently lower than IEFA’s. This likely has to do with the fact that SCHE’s top industry position is technology, where Taiwan Semiconductor Manufacturing leads. The stock is up more than 140% year over year.
The funds offer identical 0.07% expense ratios, but IEFA’s more established holdings lend the fund a higher dividend yield, which may appeal to income investors. If your goal is to diversify your holdings away from the U.S. market, it may be wise to hold both of these ETFs, which would allow you to enjoy both dividend income and capital appreciation.
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HSBC Holdings is an advertising partner of Motley Fool Money. Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, AstraZeneca Plc, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool recommends Alibaba Group and HSBC Holdings. The Motley Fool has a disclosure policy.
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