Which International ETF Is the Better Buy: Schwab's Emerging Markets SCHE or iShares' World ETF URTH?

Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) provides low-cost exposure to developing economies, while iShares MSCI World ETF (NYSEMKT:URTH) focuses on established developed markets with higher historical growth and lower volatility.

These two funds target different slices of the global equity market, providing distinct avenues for international diversification. While Schwab Emerging Markets Equity ETF focuses on the high-growth potential found within developing nations, iShares MSCI World ETF offers a broader look at established developed economies, including significant exposure to the U.S. stock market for stability.

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.

Cost-conscious investors may find Schwab Emerging Markets Equity ETF particularly attractive due to its low 0.06% expense ratio, which is considerably cheaper than its peer. Furthermore, the Schwab fund offers a significantly higher payout for income-focused portfolios, with a 2.6% trailing-12-month yield compared to the 1.4% provided by the iShares fund.

Performance & risk comparison

What's inside

iShares MSCI World ETF aims to mirror developed global economies and holds 1,281 stocks. Its sector allocation is led by Technology at 30%, Financial Services at 17%, and Industrials at 11%. Its largest positions include Nvidia (NASDAQ:NVDA) at 5.34%, Apple (NASDAQ:AAPL) at 4.94%, and Microsoft (NASDAQ:MSFT) at 3.77%. It launched in 2012. iShares MSCI World ETF has paid $2.84 per share over the trailing 12 months, which on its recent ~$209.9 share price works out to a 1.4% yield.

Schwab Emerging Markets Equity ETF tracks the FTSE Emerging Index and holds 2,222 securities. The portfolio tilts toward Technology at 30%, Financial Services at 22%, and Consumer Cyclical at 10%. Top holdings include Taiwan Semiconductor Manufacturing (TWSE:2330) at 16.86%, Tencent Holdings (SEHK:700) at 3.25%, and Alibaba Group Holding at 2.49%. It launched in 2010. Schwab Emerging Markets Equity ETF has paid $0.95 per share over the trailing 12 months, which on its recent ~$37.3 share price works out to a 2.6% yield.

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Which looks like the better buy

Investing in emerging markets means betting on the world's fastest-growing economies while accepting risks that developed economies largely leave behind. China, India, Taiwan, and South Korea are home to some of the most dynamic companies and expanding middle classes on the planet, but those same markets come with political risk, currency volatility, and regulatory unpredictability.

That tension is exactly what this comparison captures. SCHE offers a remarkably low-cost entry into more than 2,000 emerging market companies, yielding more than URTH at a fraction of the fee. URTH's developed-market focus has delivered stronger five-year returns and a milder historical drawdown, though investors should note that more than 60% of its portfolio is in U.S. stocks. So it's less of an international diversifier than its global label implies.

SCHE is the better buy for investors who want to directly own the next chapter of global economic expansion, without paying much for the privilege. URTH offers a smoother ride, but its heavy U.S. weighting in companies like Nvidia raises a fair question about whether it is truly an international fund or simply a more expensive version of what most investors already own.

Sara Appino has positions in Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool has a disclosure policy.