SCHE tilts heavily toward technology and a handful of large Chinese and Taiwanese firms, increasing concentration risk
Vanguard Total International Stock ETF (NASDAQ:VXUS) offers broader global diversification and a lower expense ratio, while Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) focuses on emerging markets with a tech-heavy tilt and slightly higher costs.
Both VXUS and SCHE aim to give investors exposure to stocks outside the United States, but they go about it in different ways. VXUS spans both developed and emerging non-U.S. markets with more than 8,600 holdings, while SCHE zeroes in on emerging markets and carries a much more concentrated portfolio. This comparison highlights key differences in cost, performance, sector exposure, and risk.
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.
SCHE is slightly pricier, with an expense ratio of 0.07% compared to VXUS at 0.05%. Both funds offer similar dividend yields, though VXUS edges out SCHE by 0.2 percentage points for a modestly higher payout.
VXUS has weathered market downturns with a smaller five-year max drawdown and delivered stronger five-year growth of $1,000 invested, reflecting its broader diversification and exposure to developed markets. SCHE’s deeper drawdown and lower five-year growth highlight the higher volatility and risk that often come with an emerging markets focus.
SCHE tracks the FTSE Emerging Index, concentrating on markets like China, Taiwan, and India with 2,163 holdings as of its 16.1-year track record. Technology dominates at 25%, followed by financial services and consumer cyclicals. The top three holdings — Taiwan Semiconductor Manufacturing (2330.TW) 14.75%, Tencent Holdings Ltd (0700.HK) 3.85%, and Alibaba Group Holding Ltd (9988.HK) 3.11% — make up over 21% of assets, which increases concentration risk compared to more evenly spread funds.
VXUS, by contrast, is far broader, holding more than 8,600 stocks across both developed and emerging economies. Its largest sector weights go to financial services, technology, and industrials, but no single company comprises more than 0.01% of assets, with names like Dongfang Electronics Co Ltd (000682.SZ), FAW Jiefang Group Co Ltd (000800.SZ), and STO Express Co Ltd (002468.SZ) among the top positions. This approach delivers much wider diversification and reduces single-country or company risk.
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U.S. investors often seek international exposure to diversify equity risk beyond a single country. The primary consideration is not whether to invest internationally, but rather the proportion of exposure allocated to developed markets compared to more volatile emerging economies. This distinction is central to the choice between the Vanguard Total International Stock ETF and the Schwab Emerging Markets Equity ETF.
VXUS spreads investments across both developed and emerging markets, holding thousands of stocks. Its performance follows the overall non-U.S. equity market instead of relying on any one country. SCHE, on the other hand, focuses only on emerging markets, with large investments in countries like China, Taiwan, and India. By choosing SCHE, investors give up the stability of developed markets for a chance at higher growth, but also face more ups and downs from currency changes, government policies, and shifting capital flows.
Choosing between the two ETFs depends on how you want to handle international risk in your portfolio. VXUS provides a broad international base, adding global diversity to your U.S. investments. SCHE is more focused, aiming to boost your exposure to emerging markets. The best option comes down to whether you want steadier overall returns or are willing to take on more risk for the chance of higher growth.
