The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between AGG and EFA? And which fund is better?
The expense ratio of AGG is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%). AGG is mostly comprised of AAA bonds while EFA has a high exposure to the financial services sector. Overall, AGG has provided lower returns than EFA over the past ten years.
In this article, we’ll compare AGG vs. EFA. We’ll look at performance and industry exposure, as well as at their annual returns and fund composition. Moreover, I’ll also discuss AGG’s and EFA’s portfolio growth, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares MSCI EAFE ETF|
|Category||Intermediate-Term Bond||Foreign Large Blend|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
AGG’s dividend yield is 0.33% lower than that of EFA (1.95% vs. 2.28%). Also, AGG yielded on average 2.43% less per year over the past decade (4.04% vs. 6.47%). The expense ratio of AGG is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Standard Deviation of 3.03 with a Treynor Ratio of 2.7 and a Alpha of -0.08. Its Mean Return is 0.28 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a R-squared of 99.96 and a Beta of 1.01.
The iShares MSCI EAFE ETF (EFA) has a Alpha of 0.47 with a Mean Return of 0.57 and a Standard Deviation of 15.01. Its Treynor Ratio is 5.33 while EFA’s R-squared is 96.78. Furthermore, the fund has a Sharpe Ratio of 0.41 and a Beta of 0.98.
AGG’s Mean Return is 0.29 points lower than that of EFA and its R-squared is 3.18 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than EFA. The Alpha and Beta of AGG are 0.55 points lower and 0.03 points higher than EFA’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2017 was the strongest year for EFA, returning 24.94% on an annual basis. The poorest year for EFA in the last ten years was 2018, with a yield of -13.83%. Most years the iShares MSCI EAFE ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 0.96%, 7.52%, and 7.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in EFA, the end total would have been $18,269. This equates to a $8,269 profit over 11 years and a compound annual growth rate (CAGR) of 6.47%.
AGG’s CAGR is 2.43 percentage points lower than that of EFA and as a result, would have yielded $2,901 less on a $10,000 investment. Thus, AGG performed worse than EFA by 2.43% annually.
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