The Schwab Emerging Markets Equity ETF (SCHE) seeks to track the FTSE Emerging Markets Index, which measures the investment return of large- and mid-capitalization stocks from developing countries including China, India, Taiwan, South Korea, and Brazil. This emerging markets equity ETF provides broad exposure to approximately 800+ companies across 24 developing nations.
How It Works
SCHE uses a passively managed, market-capitalization-weighted approach that mirrors its benchmark index composition. The fund holds constituent stocks in proportion to their market value, with Chinese companies typically representing the largest allocation at around 30-35% of assets. Rebalancing occurs quarterly to maintain alignment with index changes and country weight targets. The ETF provides diversified exposure across sectors including technology, financials, and consumer discretionary stocks from emerging economies.
Key Features
- Extremely low 0.11% expense ratio makes it one of the cheapest emerging markets ETFs available to investors
- Broad geographic diversification across 24 emerging market countries reduces single-country concentration risk compared to regional ETFs
- Large fund size and Schwab backing typically provide strong liquidity and tight bid-ask spreads for efficient trading
Risks
- This ETF can lose significant value during emerging market selloffs, potentially declining 40-60% during global financial crises as foreign capital flees developing economies
- Currency fluctuations can amplify losses when emerging market currencies weaken against the U.S. dollar, adding 10-20% additional volatility to returns
- Political instability, regulatory changes, or economic crises in major holdings like China or India can cause sharp, sudden declines in fund value
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for growth-oriented investors with 7+ year time horizons seeking international diversification. High risk tolerance required due to emerging market volatility exceeding developed markets by 50-100%. Works well for younger investors building long-term wealth who can withstand significant short-term fluctuations.