The iShares MSCI EAFE ETF (EFA) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between EFA and IGSB? And which fund is better?
The expense ratio of EFA is 0.26 percentage points higher than IGSB’s (0.32% vs. 0.06%). EFA also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, EFA has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare EFA vs. IGSB. We’ll look at portfolio growth and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss EFA’s and IGSB’s performance, risk metrics, and holdings and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|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 iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
EFA’s dividend yield is 0.26% higher than that of IGSB (2.28% vs. 2.02%). Also, EFA yielded on average 3.96% more per year over the past decade (6.47% vs. 2.51%). The expense ratio of EFA is 0.26 percentage points higher than IGSB’s (0.32% vs. 0.06%).
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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%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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The iShares MSCI EAFE ETF (EFA) has a Alpha of 0.47 with a R-squared of 96.78 and a Mean Return of 0.57. Its Standard Deviation is 15.01 while EFA’s Beta is 0.98. Furthermore, the fund has a Sharpe Ratio of 0.41 and a Treynor Ratio of 5.33.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a Sharpe Ratio of 0.82 and a Beta of 0.34. Its Alpha is 0.69 while IGSB’s Standard Deviation is 2. Furthermore, the fund has a Treynor Ratio of 4.82 and a R-squared of 26.13.
EFA’s Mean Return is 0.38 points higher than that of IGSB and its R-squared is 70.65 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than IGSB. The Alpha and Beta of EFA are 0.22 points lower and 0.64 points higher than IGSB’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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% 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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
EFA’s CAGR is 3.96 percentage points higher than that of IGSB and as a result, would have yielded $5,166 more on a $10,000 investment. Thus, EFA outperformed IGSB by 3.96% annually.
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