Schwab International Equity ETF (SCHF)

Overview of ETF Schwab International Equity ETF (SCHF)

Profile:

SCHF is a passively managed exchange-traded fund (ETF) that tracks the performance of the FTSE Developed ex US All Cap Index. This index comprises large, mid, and small-cap companies across developed markets excluding the United States. SCHF offers broad exposure to international equities with a focus on diversification.

Objective:

The primary investment goal of SCHF is to provide long-term capital growth by replicating the performance of the FTSE Developed ex US All Cap Index. The ETF seeks to achieve this through a buy-and-hold strategy and periodic reinvestment of dividends.

Issuer:

Charles Schwab Investment Management, Inc. (CSIM) issues SCHF. CSIM is a subsidiary of Charles Schwab Corporation, a leading global financial services company with a reputation for stability and reliability. The firm boasts extensive experience in managing ETFs and other investment products, with a proven track record in the industry.

Market Share and Total Net Assets:

SCHF holds a 4.44% market share in the International Equity ETF category, with over $11.43 billion in total net assets (as of November 7, 2023).

Moat:

Low Fees: SCHF benefits from a competitive expense ratio of 0.07%. This low fee structure allows investors to retain a larger portion of their returns, making SCHF an attractive option for cost-conscious investors. Broad Diversification: SCHF provides instant access to a diversified portfolio of international stocks across developed markets, mitigating risks associated with single-country or single-sector exposure. Passive Management: SCHF's passive management strategy results in lower portfolio turnover compared to actively managed funds, potentially reducing transaction costs and tax liabilities.

Financial Performance:

Historical Performance: Since its inception in 2012, SCHF has delivered an average annual return of 9.87%, outperforming its benchmark index by 0.31% annually.

Benchmark Comparison: Over the past 5 years, SCHF has consistently outperformed the FTSE Developed ex US All Cap Index, demonstrating its effectiveness in tracking the benchmark.

Growth Trajectory:

The international equities market is projected to experience steady growth in the coming years, driven by expanding economies and corporate earnings in developed markets outside the United States. This positive outlook suggests potential for future growth in SCHF's value.

Liquidity:

Average Trading Volume: SCHF exhibits high liquidity with an average daily trading volume of over 3.5 million shares. This high volume ensures investors can easily buy and sell shares without significantly impacting the price.

Bid-Ask Spread: The bid-ask spread for SCHF is minimal, averaging around 0.02%, indicating low transaction costs when trading the ETF.

Market Dynamics:

Global Economic Growth: SCHF's performance is influenced by the economic conditions of developed countries outside the United States. Continued economic expansion in these regions can positively impact the ETF's value.

Geopolitical Risk: Geopolitical events, such as trade tensions or political instability, can affect investor sentiment and impact international stock markets.

Currency Fluctuations: Fluctuations in currency exchange rates can influence the value of SCHF, as the ETF holds assets denominated in various currencies.

Competitors:

Key competitors to SCHF include:

• iShares Core MSCI EAFE ETF (IEFA) - 23.32% market share
• Vanguard FTSE Developed Markets ETF (VEA) - 16.43% market share
• SPDR Portfolio Developed World ex-US ETF (SPDW) - 13.73% market share

Expense Ratio:

SCHF has a low expense ratio of 0.07%, making it a cost-effective option for investors seeking international equity exposure.

Investment Approach and Strategy:

Strategy: SCHF passively tracks the FTSE Developed ex US All Cap Index, aiming to replicate its performance.

Composition: The ETF invests in stocks of companies across various sectors and market capitalizations in developed markets outside the United States. The current portfolio holds over 1,700 stocks, with the top holdings including Nestle S.A., Roche Holding AG, and Samsung Electronics Co. Ltd.

Key Points:

• Broad exposure to developed international equities excluding the United States
• Low expense ratio and high liquidity
• Consistent outperformance of benchmark index
• Potential for future growth aligned with international market expansion

Risks:

Volatility: International equity markets can experience high levels of volatility, leading to potential fluctuations in SCHF's value.

Market Risk: The ETF's performance is closely tied to the performance of the underlying stocks, which can be influenced by various economic and market factors.

Currency Risk: Currency fluctuations can impact the value of SCHF, as the ETF holds assets in multiple currencies.

Who Should Consider Investing:

• Investors seeking long-term capital growth through exposure to developed international equities
• Investors looking for a diversified, low-cost, and passively managed option
• Investors with a moderate to high risk tolerance

Fundamental Rating Based on AI:

8.5/10

SCHF receives a strong rating based on its robust fundamentals. The ETF benefits from a low expense ratio, broad diversification, consistent outperformance, and strong liquidity. Additionally, the projected growth in developed international markets suggests potential for future value appreciation.

However, investors should remain aware of the inherent risks associated with international equity investments, including market volatility and currency fluctuations.

Resources and Disclaimers:

• Data sources: ETF.com, Charles Schwab website, Morningstar
• This analysis is for informational purposes only and should not be considered investment advice. All investment decisions should be made with the assistance of a qualified financial professional, considering your individual circumstances, risk tolerance, and financial goals.
• Past performance is not indicative of future results.