SCHF vs. IEFA: Performance, Costs, and Income – Which Core ETF Wins for International Investors?

Understanding the Core Differences

When building international exposure, investors often face a choice between Schwab International Equity ETF (SCHF) and iShares Core MSCI EAFE ETF (IEFA). While both are quality core ETF options tracking developed markets outside the U.S., they differ in how they structure portfolios, what they charge, and how much income they generate.

SCHF tracks the FTSE Developed ex US Index and maintains a leaner approach with 1,501 holdings, emphasizing broad diversification at rock-bottom costs. IEFA, by contrast, casts a wider net with 2,600 stocks across the MSCI EAFE universe, offering more granular coverage of international developed markets.

The Cost Factor: Where SCHF’s Advantage Shines

For fee-conscious investors, the expense ratio difference between these core ETF offerings is worth noting:

• SCHF: 0.03% expense ratio
• IEFA: 0.07% expense ratio

Though both are extremely cheap, SCHF’s ultra-low fee structure means you keep more of your returns working for you. Over decades, that 0.04% difference compounds. For a $100,000 portfolio, SCHF would save you roughly $40 annually compared to IEFA – a small but meaningful edge.

Income Generation: SCHF Pulls Ahead

If dividend income matters to your strategy, SCHF delivers:

• SCHF dividend yield: 3.5%
• IEFA dividend yield: 2.9%

That 0.6% yield premium from SCHF translates to tangible cash flow differences, particularly for income-focused investors or those planning withdrawals.

The Growth Picture: Nearly Identical Performance

When it comes to returns, these core ETF options perform remarkably similarly:

Both funds absorbed international market volatility similarly, with IEFA showing marginally larger peak-to-trough declines but SCHF providing slightly better real-world gains. The performance gap is negligible, suggesting that factors like fees and yields become the tiebreaker.

Portfolio Composition and Holdings

SCHF’s concentrated approach:

• 1,501 holdings
• Top sectors: Financial Services (24%), Industrials (19%), Technology (11%)
• Largest positions: ASML Holding, Samsung Electronics, Roche Holding

IEFA’s broad approach:

• 2,600 holdings
• Top sectors: Financial Services (22%), Industrials (20%), Healthcare (10%)
• Largest positions: ASML Holding, AstraZeneca, Roche Holding

Both core ETF options maintain similar sector allocations, and their top holdings overlap (ASML and Roche appear in both). However, IEFA’s larger holding count provides exposure to smaller international firms, which some investors view as additional diversification.

Asset Size and Historical Track Record

• SCHF: $54.8 billion in assets under management
• IEFA: $161.9 billion in assets under management

IEFA’s larger asset base reflects its longer market presence, but SCHF’s $54.8 billion still qualifies as a well-established fund with institutional staying power.

Making Your Choice: Which Core ETF Fits Your Goals?

Choose SCHF if you:

• Prioritize minimizing ongoing costs
• Seek higher current income through dividends
• Want a slightly tighter, focused international portfolio
• Plan to hold long-term and let that 0.03% expense ratio advantage compound

Choose IEFA if you:

• Prefer maximum diversification across 2,600 stocks
• Are comfortable with a slightly higher expense ratio
• Want exposure to more emerging healthcare and smaller international firms
• Have longer historical data as a secondary consideration

The Verdict

These two core ETF options are far more similar than different. Both deliver low-cost, broad international exposure without hedging or complicated overlays. The meaningful differences narrow down to SCHF’s cost advantage (0.03% vs 0.07%) and its superior dividend yield (3.5% vs 2.9%). For investors highly sensitive to fees or seeking meaningful income, SCHF presents a modest but real edge. For those prioritizing maximum breadth across developed international markets, IEFA’s larger holding count justifies the slightly higher fee.

Neither choice is wrong – both are quality core ETF vehicles for international exposure. Your decision ultimately depends on whether you value cost minimization and income over maximum diversification.