The iShares MSCI EAFE ETF (EFA) and the Vanguard Short-Term Bond Index Fund ETF Shares (BSV) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and BSV is a Vanguard Short-Term Bond fund. So, what’s the difference between EFA and BSV? And which fund is better?
The expense ratio of EFA is 0.27 percentage points higher than BSV’s (0.32% vs. 0.05%). EFA also has a high exposure to the financial services sector while BSV is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than BSV over the past ten years.
In this article, we’ll compare EFA vs. BSV. We’ll look at annual returns and portfolio growth, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss EFA’s and BSV’s fund composition, holdings, and performance and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Short-Term Bond Index Fund ETF Shares|
|Category||Foreign Large Blend||Short-Term Bond|
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%.
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.
EFA’s dividend yield is 0.80% higher than that of BSV (2.28% vs. 1.48%). Also, EFA yielded on average 4.20% more per year over the past decade (6.47% vs. 2.27%). The expense ratio of EFA is 0.27 percentage points higher than BSV’s (0.32% vs. 0.05%).
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|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%.
|BSV Bond Sectors||Weight|
BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.
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The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Treynor Ratio of 5.33 and a Standard Deviation of 15.01. Its R-squared is 96.78 while EFA’s Alpha is 0.47. Furthermore, the fund has a Sharpe Ratio of 0.41 and a Beta of 0.98.
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a R-squared of 78.38 with a Sharpe Ratio of 0.98 and a Alpha of 0.21. Its Beta is 0.38 while BSV’s Treynor Ratio is 3.33. Furthermore, the fund has a Mean Return of 0.16 and a Standard Deviation of 1.33.
EFA’s Mean Return is 0.41 points higher than that of BSV and its R-squared is 18.40 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than BSV. The Alpha and Beta of EFA are 0.26 points higher and 0.60 points higher than BSV’s Alpha and Beta.
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EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% respectively.
The year 2019 was the strongest year for BSV, returning 4.92% on an annual basis. The poorest year for BSV in the last ten years was 2013, with a yield of 0.17%. Most years the Vanguard Short-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2018, 2016, and 2012, when gains were 1.34%, 1.42%, and 1.98% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFA would have resulted in a final balance of $18,269. This is a profit of $8,269 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
With a $10,000 investment in BSV, the end total would have been $12,785. This equates to a $2,785 profit over 11 years and a compound annual growth rate (CAGR) of 2.27%.
EFA’s CAGR is 4.20 percentage points higher than that of BSV and as a result, would have yielded $5,484 more on a $10,000 investment. Thus, EFA outperformed BSV by 4.20% annually.
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