EFA vs. IWR: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares Russell Mid-Cap ETF (IWR) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IWR is a iShares Mid-Cap Blend fund. So, what’s the difference between EFA and IWR? And which fund is better?

The expense ratio of EFA is 0.13 percentage points higher than IWR’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 IWR over the past ten years.

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

Summary

EFA IWR
Name iShares MSCI EAFE ETF iShares Russell Mid-Cap ETF
Category Foreign Large Blend Mid-Cap Blend
Issuer iShares iShares
AUM 56.77B 29.84B
Avg. Return 6.47% 14.15%
Div. Yield 2.28% 0.99%
Expense Ratio 0.32% 0.19%

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 Russell Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

EFA’s dividend yield is 1.29% higher than that of IWR (2.28% vs. 0.99%). Also, EFA yielded on average 7.68% less per year over the past decade (6.47% vs. 14.15%). The expense ratio of EFA is 0.13 percentage points higher than IWR’s (0.32% vs. 0.19%).

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Fund Composition

Industry Exposure

EFA vs. IWR - Industry Exposure

EFA IWR
Technology 9.68% 19.67%
Industrials 15.01% 14.54%
Energy 3.51% 3.48%
Communication Services 5.68% 4.64%
Utilities 3.35% 4.46%
Healthcare 12.8% 11.76%
Consumer Defensive 10.56% 3.82%
Real Estate 3.01% 8.31%
Financial Services 16.88% 11.64%
Consumer Cyclical 11.62% 13.59%
Basic Materials 7.91% 4.1%

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 Russell Mid-Cap ETF (IWR) has the most exposure to the Technology sector at 19.67%. This is followed by Industrials and Consumer Cyclical at 14.54% and 13.59% respectively. Consumer Defensive (3.82%), Basic Materials (4.1%), and Utilities (4.46%) only make up 12.38% of the fund’s total assets.

IWR’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Healthcare, and Consumer Cyclical stocks at 4.64%, 8.31%, 11.64%, 11.76%, and 13.59%.

EFA is 5.24% more exposed to the Financial Services sector than IWR (16.88% vs 11.64%). EFA’s exposure to Industrials and Healthcare stocks is 0.47% higher and 1.04% higher respectively (15.01% vs. 14.54% and 12.8% vs. 11.76%). In total, Utilities, Energy, and Communication Services also make up 0.04% less of the fund’s holdings compared to IWR (12.54% vs. 12.58%).

Holdings

EFA - Holdings

EFA Holdings Weight
Nestle SA 2.11%
ASML Holding NV 1.69%
Roche Holding AG 1.55%
LVMH Moet Hennessy Louis Vuitton SE 1.28%
Novartis AG 1.19%
Toyota Motor Corp 1.09%
AstraZeneca PLC 0.92%
Unilever PLC 0.9%
AIA Group Ltd 0.88%
SAP SE 0.86%

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%.

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

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Risk Analysis

EFA IWR
Mean Return 0.57 1.17
R-squared 96.78 91.52
Std. Deviation 15.01 15.66
Alpha 0.47 -2.8
Beta 0.98 1.11
Sharpe Ratio 0.41 0.86
Treynor Ratio 5.33 11.72

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

The iShares Russell Mid-Cap ETF (IWR) has a Sharpe Ratio of 0.86 with a Beta of 1.11 and a Treynor Ratio of 11.72. Its Standard Deviation is 15.66 while IWR’s Alpha is -2.8. Furthermore, the fund has a Mean Return of 1.17 and a R-squared of 91.52.

EFA’s Mean Return is 0.60 points lower than that of IWR and its R-squared is 5.26 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than IWR. The Alpha and Beta of EFA are 3.27 points higher and 0.13 points lower than IWR’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. IWR - Annual Returns

Year EFA IWR
2020 7.92% 16.91%
2019 21.94% 30.31%
2018 -13.83% -9.13%
2017 24.94% 18.32%
2016 0.96% 13.58%
2015 -0.9% -2.57%
2014 -5.04% 13.03%
2013 22.62% 34.5%
2012 17.22% 17.13%
2011 -12.18% -1.67%
2010 7.52% 25.25%

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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

EFA vs. IWR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
IWR $10,000 $39,751 14.15%

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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.

EFA’s CAGR is 7.68 percentage points lower than that of IWR and as a result, would have yielded $21,482 less on a $10,000 investment. Thus, EFA performed worse than IWR by 7.68% annually.


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