The iShares MSCI EAFE ETF (EFA) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between EFA and MBB? And which fund is better?
The expense ratio of EFA is 0.26 percentage points higher than MBB’s (0.32% vs. 0.06%). EFA also has a high exposure to the financial services sector while MBB is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than MBB over the past ten years.
In this article, we’ll compare EFA vs. MBB. We’ll look at risk metrics and fund composition, as well as at their annual returns and performance. Moreover, I’ll also discuss EFA’s and MBB’s industry exposure, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||iShares MBS ETF|
|Category||Foreign Large Blend||Intermediate Government|
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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
EFA’s dividend yield is 0.40% higher than that of MBB (2.28% vs. 1.88%). Also, EFA yielded on average 3.39% more per year over the past decade (6.47% vs. 3.08%). The expense ratio of EFA is 0.26 percentage points higher than MBB’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%.
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares MSCI EAFE ETF (EFA) has a Sharpe Ratio of 0.41 with a Treynor Ratio of 5.33 and a Beta of 0.98. Its Mean Return is 0.57 while EFA’s Alpha is 0.47. Furthermore, the fund has a Standard Deviation of 15.01 and a R-squared of 96.78.
The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a R-squared of 74.38 and a Sharpe Ratio of 0.87. Its Treynor Ratio is 3.02 while MBB’s Alpha is 0.14. Furthermore, the fund has a Standard Deviation of 2.12 and a Beta of 0.6.
EFA’s Mean Return is 0.37 points higher than that of MBB and its R-squared is 22.40 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than MBB. The Alpha and Beta of EFA are 0.33 points higher and 0.38 points higher than MBB’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 MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% 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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
EFA’s CAGR is 3.39 percentage points higher than that of MBB and as a result, would have yielded $4,363 more on a $10,000 investment. Thus, EFA outperformed MBB by 3.39% annually.
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