Schwab International Equity ETF vs. Vanguard Total International Stock ETF: Two Low-Cost International ETFs, but One Offers More Growth Potential for the Next Decade
Schwab and Vanguard offer two inexpensive ways to invest internationally, but their differences in global exposure could have a meaningful impact on long-term returns.
Two low-cost international ETFs, the Schwab International Equity ETF (SCHF) and the Vanguard Total International Stock ETF (VXUS), offer distinct approaches for investors looking to diversify away from U.S. concentration. SCHF concentrates on developed international markets with a low expense ratio of 0.03%, while VXUS provides broader exposure to emerging markets at a slightly higher fee of 0.05%.
Both funds aim to minimize costs, but VXUS boasts a higher trailing distribution yield, making it an attractive option for income-focused investors.
SCHF tracks the FTSE Developed ex-US Index, providing concentrated exposure to established international markets. Its portfolio is weighted toward financials (25%), industrials (17.5%), and information technology (16%). Top holdings include Samsung Electronics, SK Hynix, and ASML Holding. With over 1,400 holdings, SCHF has paid $0.84 per share in dividends over the past year, translating to a 3.1% yield at its current price.
VXUS, on the other hand, extends its focus to emerging markets, encompassing a larger portfolio of around 8,600 holdings. It concentrates in financials (23%), technology (19%), and industrials (15%). Key holdings include Taiwan Semiconductor Manufacturing, Samsung Electronics, and SK Hynix. Over the past year, VXUS has paid $1.98 per share in dividends, resulting in a 2.4% yield.
When considering a long-term investment horizon of a decade, VXUS emerges as the preferable choice. While both ETFs have meaningful exposure to AI infrastructure, VXUS offers a more comprehensive geographic diversification by including emerging markets such as China and India. This exposure provides access to additional long-term growth opportunities, albeit with a higher level of risk.
However, for investors seeking to build an international portfolio over the next decade, the broader reach of VXUS appears to be the more advantageous option.
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