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EFA vs. ITOT: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and ITOT is a iShares Large Blend fund. So, what’s the difference between EFA and ITOT? And which fund is better?

The expense ratio of EFA is 0.29 percentage points higher than ITOT’s (0.32% vs. 0.03%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than ITOT over the past ten years.

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

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Summary

EFAITOT
NameiShares MSCI EAFE ETFiShares Core S&P Total U.S. Stock Market ETF
CategoryForeign Large BlendLarge Blend
IssueriSharesiShares
AUM56.77B41.97B
Avg. Return6.47%14.59%
Div. Yield2.28%1.2%
Expense Ratio0.32%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%.

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.

EFA’s dividend yield is 1.08% higher than that of ITOT (2.28% vs. 1.2%). Also, EFA yielded on average 8.12% less per year over the past decade (6.47% vs. 14.59%). The expense ratio of EFA is 0.29 percentage points higher than ITOT’s (0.32% vs. 0.03%).

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Fund Composition

Industry Exposure

EFA vs. ITOT - Industry Exposure

EFAITOT
Technology9.68%24.49%
Industrials15.01%9.21%
Energy3.51%2.51%
Communication Services5.68%10.54%
Utilities3.35%2.35%
Healthcare12.8%13.59%
Consumer Defensive10.56%5.79%
Real Estate3.01%3.67%
Financial Services16.88%13.69%
Consumer Cyclical11.62%11.69%
Basic Materials7.91%2.47%

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 iShares Core S&P Total U.S. Stock Market ETF (ITOT) has the most exposure to the Technology sector at 24.49%. This is followed by Financial Services and Healthcare at 13.69% and 13.59% respectively. Basic Materials (2.47%), Energy (2.51%), and Real Estate (3.67%) only make up 8.65% of the fund’s total assets.

ITOT’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.79%, 9.21%, 10.54%, 11.69%, and 13.59%.

EFA is 3.19% more exposed to the Financial Services sector than ITOT (16.88% vs 13.69%). EFA’s exposure to Industrials and Healthcare stocks is 5.80% higher and 0.79% lower respectively (15.01% vs. 9.21% and 12.8% vs. 13.59%). In total, Utilities, Energy, and Communication Services also make up 2.86% less of the fund’s holdings compared to ITOT (12.54% vs. 15.40%).

Holdings

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%.

ITOT - Holdings

ITOT HoldingsWeight
Apple Inc5.07%
Microsoft Corp4.75%
Amazon.com Inc3.16%
Facebook Inc Class A1.89%
Alphabet Inc Class A1.79%
Alphabet Inc Class C1.71%
Tesla Inc1.17%
Berkshire Hathaway Inc Class B1.17%
NVIDIA Corp1.08%
JPMorgan Chase & Co1.02%

ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.

Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.

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Risk Analysis

EFAITOT
Mean Return0.571.27
R-squared96.7899.4
Std. Deviation15.0114.02
Alpha0.47-0.54
Beta0.981.03
Sharpe Ratio0.411.04
Treynor Ratio5.3314.13

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

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a R-squared of 99.4 with a Mean Return of 1.27 and a Treynor Ratio of 14.13. Its Standard Deviation is 14.02 while ITOT’s Beta is 1.03. Furthermore, the fund has a Sharpe Ratio of 1.04 and a Alpha of -0.54.

EFA’s Mean Return is 0.70 points lower than that of ITOT and its R-squared is 2.62 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than ITOT. The Alpha and Beta of EFA are 1.01 points higher and 0.05 points lower than ITOT’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. ITOT - Annual Returns

YearEFAITOT
20207.92%20.75%
201921.94%30.87%
2018-13.83%-5.27%
201724.94%21.23%
20160.96%12.59%
2015-0.9%0.96%
2014-5.04%13.01%
201322.62%32.67%
201217.22%15.98%
2011-12.18%1.55%
20107.52%16.15%

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 ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% respectively.

Portfolio Growth

EFA vs. ITOT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EFA$10,000$18,2696.47%
ITOT$10,000$42,31014.59%

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 ITOT, the end total would have been $42,310. This equates to a $32,310 profit over 11 years and a compound annual growth rate (CAGR) of 14.59%.

EFA’s CAGR is 8.12 percentage points lower than that of ITOT and as a result, would have yielded $24,041 less on a $10,000 investment. Thus, EFA performed worse than ITOT by 8.12% annually.


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