iShares Emerging Markets ETF Outpaces Schwab Amid Tech-Heavy Rotation
A financial analysis by The Motley Fool highlights the performance gap between the two major emerging markets funds, noting that iShares’ technology weighting justifies its expense ratio.
A recent financial analysis by The Motley Fool has identified the iShares MSCI Emerging Markets ETF (EEM) as the superior performer when compared to the Schwab Emerging Markets Equity ETF (SCHE). The review highlights that while Schwab offers a significantly lower cost structure, the iShares fund has delivered stronger returns across multiple timeframes, including year-to-date and one-year periods.
The iShares ETF has recorded a total return of 20% year-to-date, compared to 11% for the Schwab offering. Over the trailing 12 months, EEM returned 37%, while SCHE returned 22%. This performance edge extends to longer-term metrics, with iShares holding the advantage over three-, five-, and ten-year periods.
Cost remains the primary differentiator for investors. Schwab charges an expense ratio of 0.06%, whereas iShares charges 0.72%. However, the analysis suggests that iShares’ higher fees are justified by its outperformance. Schwab does offer a higher dividend yield of 2.60% compared to iShares’ 1.70%, but the performance gap has favoured the iShares fund.
Portfolio composition plays a key role in these results. The iShares ETF is more heavily weighted in technology stocks, which make up 42% of the portfolio, compared to 26% for Schwab. This tech-heavy allocation has benefited from the broader artificial intelligence infrastructure boom. Schwab tracks the FTSE Emerging Index with 2,226 holdings, while iShares tracks the MSCI Emerging Markets Index with 1,223 holdings.
Investor interest in emerging markets has grown as a diversification strategy away from US large-caps. Despite Schwab’s lower costs, it was not included in The Motley Fool’s list of 10 best stocks to buy, with analysts pointing to higher return potential in other identified equities. The Motley Fool’s Stock Advisor service reported a total average return of 934% as of July 16, 2026, compared to 210% for the S&P 500.
