The iShares MSCI EAFE ETF (EFA) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between EFA and DFAC? And which fund is better?
The expense ratio of EFA is 0.13 percentage points higher than DFAC’s (0.32% vs. 0.19%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than DFAC over the past ten years.
In this article, we’ll compare EFA vs. DFAC. We’ll look at portfolio growth and fund composition, as well as at their risk metrics and holdings. Moreover, I’ll also discuss EFA’s and DFAC’s performance, industry exposure, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Dimensional U.S. Core Equity 2 ETF|
|Category||Foreign Large Blend||Large Blend|
|Issuer||iShares||Dimensional Fund Advisors|
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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
EFA’s dividend yield is 1.28% higher than that of DFAC (2.28% vs. 1.0%). Also, EFA yielded on average 7.46% less per year over the past decade (6.47% vs. 13.93%). The expense ratio of EFA is 0.13 percentage points higher than DFAC’s (0.32% vs. 0.19%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.
EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.
DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.
EFA is 0.71% more exposed to the Financial Services sector than DFAC (16.88% vs 16.17%). EFA’s exposure to Industrials and Healthcare stocks is 0.88% higher and 0.71% higher respectively (15.01% vs. 14.13% and 12.8% vs. 12.09%). In total, Utilities, Energy, and Communication Services also make up 0.70% more of the fund’s holdings compared to DFAC (12.54% vs. 11.84%).
|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%.
|Johnson & Johnson||1.05%|
|Facebook Inc Class A||1.05%|
|JPMorgan Chase & Co||1.0%|
|Alphabet Inc Class C||0.85%|
|Alphabet Inc Class A||0.84%|
|Berkshire Hathaway Inc Class B||0.75%|
|Visa Inc Class A||0.74%|
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares MSCI EAFE ETF (EFA) has a Treynor Ratio of 5.33 with a Sharpe Ratio of 0.41 and a Standard Deviation of 15.01. Its Beta is 0.98 while EFA’s R-squared is 96.78. Furthermore, the fund has a Mean Return of 0.57 and a Alpha of 0.47.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Treynor Ratio of 11.85 with a R-squared of 95.1 and a Beta of 1.12. Its Sharpe Ratio is 0.88 while DFAC’s Mean Return is 1.19. Furthermore, the fund has a Standard Deviation of 15.55 and a Alpha of -2.75.
EFA’s Mean Return is 0.62 points lower than that of DFAC and its R-squared is 1.68 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than DFAC. The Alpha and Beta of EFA are 3.22 points higher and 0.14 points lower than DFAC’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% 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 DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
EFA’s CAGR is 7.46 percentage points lower than that of DFAC and as a result, would have yielded $20,527 less on a $10,000 investment. Thus, EFA performed worse than DFAC by 7.46% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.