SCHE - For Investors looking to Invest in Emerging Markets

This article reviews SCHE ETF which invests in emerging markets around the world. It will look into the general information of the ETF such as the date of launch, dividend rate, and fees as well as the ETF's holdings. If you are interested in betting your money in the markets with large growth potential and dynamics, this article will help you find just the ETF that would serve your tastes.

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SCHE Overview

SCHE was launched by Charles Schwabs in 2010. It's been dedicated to investing in emerging markets. The number of markets it is investing is 20, and its holdings are around 1,800. The fund buys stocks of companies in various industries. Other general information about the fund is as follows:

• Date of Launch: January 14, 2010
• Index it Follows: FTSE Emerging Markets Index
• Fees: 0.11%
• AUM: $91.6B
• Dividend Rate: 2.63%
• Dividend Payment: Twice a Year (June and December)
• Competing ETFs: PBEE, VWO, IEMG, EEM, SPEM

Holdings of SCHE

The top 10 countries SCHE invests in are:

• Hongkong
• Taiwan
• India
• Brazil
• China
• South Africa
• Saudi Arabia
• Thailand
• Mexico
• Malaysia

The reason Korea is not included is FTSE, the index this fund follows categorizes the country as a developed market. The top 10 holdings of the fund are as follows:

• TSMC (Taiwanese Semiconductor Maker)
• Tencent (Chinese Internet Service Provider)
• Alibaba (Chinese Online Commerce Giant)
• Reliance Industry (Indian Energy, Petroleum, etc.)
• Infosys (Indian IT consulting)
• Vale (Brazilian Mining and Metal)
• Meituam Class B (Chinese Online Shopping Platform)
• China Construction Bank
• Housing Development Finance Corporation (Indian Housing Financing Company)
• Al Rajhi Bank (Saudi Arabian Bank)

The top 10 holdings account for 21.93%.

Pros and Cons of Investing in SCHE

One of the benefits of this ETF is it gives you a way to invest in emerging markets at a low cost. The low cost makes the fund more attractive to long-term investors. The ETF buys mostly large and mid-cap shares covering diverse sectors in many different countries. This diversification lightens the burden of poor-performing stocks. 

Against these benefits, the investors should be aware of some disadvantages. Given the ETF targets emerging markets, it is exposed to emerging market-specific risks. The geopolitical risks of these markets can be tricky. Russia's attack on Ukraine can be a recent example. Fortunately, the ETF's portfolio's exposure to Russia is less than 1%, which limited its impact on the overall performance of the fund. Since FTSE removed Russian stocks from its tradable stock list, the ETF will have to sell its Russian holdings as soon as the Russian Stock Exchange opens up. Recently FTSE has included the A-Shares of China in the index. A-Shares were restricted by the Chinese government to be traded only by the Chinese. But now foreign institutional investors are allowed to buy and sell them. This means that SCHE's exposure to the Chinese market, currently about 35% of the total portfolio, will be even more expanded. 

Given the cheap fees and extensive diversification of the investment markets and industries, This ETF is a good fund for investors wishing to reap the benefits of emerging markets with fast growth and ample potential.