Better International ETF: Schwab's SCHF vs. the iShares IEFA

The iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) provides massive scale and broader diversification, while the Schwab International Equity ETF (NYSEMKT:SCHF) offers a lower cost of entry and stronger recent performance.

Both funds target developed markets outside of the United States. While they overlap significantly in their geographic focus, differences in their underlying indexes lead to variations in holding counts, sector weights, and total return profiles that may influence an investor's long-term portfolio strategy.

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-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Schwab International Equity ETF is slightly more affordable with an expense ratio of 0.03% against the 0.07% charged by the iShares fund. However, the iShares Core MSCI EAFE ETF offers a higher payout, with a 3.3% yield compared to 3% for the Schwab fund.

Performance & risk comparison

What's inside

The iShares Core MSCI EAFE ETF manages a deep portfolio of 2,616 holdings, with a sector tilt toward financial services at 24%, industrials at 20%, and technology at 11%. Its largest positions include ASML Holding at 2.58%, HSBC Holdings at 1.35%, and Roche at 1.24%. The fund was launched in 2012. It has paid $3.29 per share over the trailing 12 months, which on its recent $100.77 share price works out to a 3.3% yield.

The Schwab International Equity ETF tracks the FTSE Developed ex US Index with a more concentrated selection of 1,494 holdings. The fund allocates 26% to financial services, 18% to industrials, and 15% to technology. Key holdings include Samsung Electronics at 2.86%, SK Hynix at 2.22%, and ASML Holding at 2.21%. The fund was launched in 2009. It has paid $0.84 per share over the trailing 12 months, which on its recent $28.42 share price works out to a 3% yield.

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Which looks like the better buy

Investors seeking to round out their U.S.-focused stock portfolios can do so efficiently through the iShares Core MSCI EAFE ETF (IEFA) and Schwab International Equity ETF (SCHF). Choosing which to invest in depends on the factors that matter most to you.

IEFA offers far greater liquidity with its large $196 billion AUM, while its more than 2,000 holdings gives you exposure to international small-cap stocks that you don't get with SCHF. Nearly 26% of the fund is comprised of equities in Japan with the U.K. second at 14%.

SCHF is the better choice for investors seeking to capitalize on the artificial intelligence boom. That's because the fund invests in South Korean companies, and its biggest holdings include Samsung and SK Hynix, two of the largest computer memory companies in the world. This is a factor in the fund's superior one-year performance. IEFA does not invest in South Korea because the index it tracks classifies the country as an emerging market and excludes it.

SCHF also sports a lower share price. The ETF performed a 2-for-1 share split in 2024, contributing to the reduced price compared to IEFA.

HSBC Holdings is an advertising partner of Motley Fool Money. Robert Izquierdo has positions in ASML. The Motley Fool has positions in and recommends ASML. The Motley Fool recommends HSBC Holdings and Roche Holding AG. The Motley Fool has a disclosure policy.