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BND vs. EFA: What’s The Difference?

The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between BND and EFA? And which fund is better?

The expense ratio of BND is 0.29 percentage points lower than EFA’s (0.03% vs. 0.32%). BND is mostly comprised of AAA bonds while EFA has a high exposure to the financial services sector. Overall, BND has provided lower returns than EFA over the past ten years.

In this article, we’ll compare BND vs. EFA. We’ll look at fund composition and portfolio growth, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss BND’s and EFA’s risk metrics, holdings, and performance and examine how these affect their overall returns.

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Summary

BNDEFA
NameVanguard Total Bond Market Index Fund ETF SharesiShares MSCI EAFE ETF
CategoryIntermediate-Term BondForeign Large Blend
IssuerVanguardiShares
AUM312.15B56.77B
Avg. Return4.09%6.47%
Div. Yield2.02%2.28%
Expense Ratio0.03%0.32%

The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.

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%.

BND’s dividend yield is 0.26% lower than that of EFA (2.02% vs. 2.28%). Also, BND yielded on average 2.38% less per year over the past decade (4.09% vs. 6.47%). The expense ratio of BND is 0.29 percentage points lower than EFA’s (0.03% vs. 0.32%).

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Fund Composition

Holdings

BND - Holdings

BND Bond SectorsWeight
AAA68.72%
BBB16.17%
A11.87%
AA3.34%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%
Others-0.11%

BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.

EFA - Holdings

EFA HoldingsWeight
Nestle SA2.11%
ASML Holding NV1.69%
Roche Holding AG1.55%
LVMH Moet Hennessy Louis Vuitton SE1.28%
Novartis AG1.19%
Toyota Motor Corp1.09%
AstraZeneca PLC0.92%
Unilever PLC0.9%
AIA Group Ltd0.88%
SAP SE0.86%

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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Risk Analysis

BNDEFA
Mean Return0.280.57
R-squared99.3496.78
Std. Deviation3.1415.01
Alpha-0.140.47
Beta1.040.98
Sharpe Ratio0.880.41
Treynor Ratio2.645.33

The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a R-squared of 99.34 with a Beta of 1.04 and a Treynor Ratio of 2.64. Its Alpha is -0.14 while BND’s Standard Deviation is 3.14. Furthermore, the fund has a Sharpe Ratio of 0.88 and a Mean Return of 0.28.

The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Alpha of 0.47 and a Treynor Ratio of 5.33. Its R-squared is 96.78 while EFA’s Standard Deviation is 15.01. Furthermore, the fund has a Sharpe Ratio of 0.41 and a Beta of 0.98.

BND’s Mean Return is 0.29 points lower than that of EFA and its R-squared is 2.56 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than EFA. The Alpha and Beta of BND are 0.61 points lower and 0.06 points higher than EFA’s Alpha and Beta.

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Performance

Annual Returns

BND vs. EFA - Annual Returns

YearBNDEFA
20207.71%7.92%
20198.71%21.94%
2018-0.04%-13.83%
20173.62%24.94%
20162.57%0.96%
20150.39%-0.9%
20145.96%-5.04%
2013-2.14%22.62%
20124.04%17.22%
20117.71%-12.18%
20106.51%7.52%

BND had its best year in 2019 with an annual return of 8.71%. BND’s worst year over the past decade yielded -2.14% and occurred in 2013. In most years the Vanguard Total Bond Market Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.62%, 4.04%, and 5.96% 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.

Portfolio Growth

BND vs. EFA - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BND$10,000$15,4564.09%
EFA$10,000$18,2696.47%

A $10,000 investment in BND would have resulted in a final balance of $15,456. This is a profit of $5,456 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.09%.

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%.

BND’s CAGR is 2.38 percentage points lower than that of EFA and as a result, would have yielded $2,813 less on a $10,000 investment. Thus, BND performed worse than EFA by 2.38% annually.


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