EFA vs. MTUM: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and MTUM is a iShares Large Growth fund. So, what’s the difference between EFA and MTUM? And which fund is better?

The expense ratio of EFA is 0.17 percentage points higher than MTUM’s (0.32% vs. 0.15%). EFA also has a lower exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than MTUM over the past ten years.

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

Summary

EFA MTUM
Name iShares MSCI EAFE ETF iShares MSCI USA Momentum Factor ETF
Category Foreign Large Blend Large Growth
Issuer iShares iShares
AUM 56.77B 14.53B
Avg. Return 6.47% 17.37%
Div. Yield 2.28% 0.44%
Expense Ratio 0.32% 0.15%

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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

EFA’s dividend yield is 1.84% higher than that of MTUM (2.28% vs. 0.44%). Also, EFA yielded on average 10.90% less per year over the past decade (6.47% vs. 17.37%). The expense ratio of EFA is 0.17 percentage points higher than MTUM’s (0.32% vs. 0.15%).

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Fund Composition

Industry Exposure

EFA vs. MTUM - Industry Exposure

EFA MTUM
Technology 9.68% 15.24%
Industrials 15.01% 12.47%
Energy 3.51% 1.77%
Communication Services 5.68% 13.18%
Utilities 3.35% 0.19%
Healthcare 12.8% 6.41%
Consumer Defensive 10.56% 2.88%
Real Estate 3.01% 0.43%
Financial Services 16.88% 34.32%
Consumer Cyclical 11.62% 9.96%
Basic Materials 7.91% 3.15%

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 MSCI USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.

MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.

EFA is 17.44% less exposed to the Financial Services sector than MTUM (16.88% vs 34.32%). EFA’s exposure to Industrials and Healthcare stocks is 2.54% higher and 6.39% higher respectively (15.01% vs. 12.47% and 12.8% vs. 6.41%). In total, Utilities, Energy, and Communication Services also make up 2.60% less of the fund’s holdings compared to MTUM (12.54% vs. 15.14%).

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%.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

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Risk Analysis

EFA MTUM
Mean Return 0.57 0
R-squared 96.78 0
Std. Deviation 15.01 0
Alpha 0.47 0
Beta 0.98 0
Sharpe Ratio 0.41 0
Treynor Ratio 5.33 0

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

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Treynor Ratio of 0 with a Beta of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while MTUM’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Alpha of 0.

EFA’s Mean Return is 0.57 points higher than that of MTUM and its R-squared is 96.78 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than MTUM. The Alpha and Beta of EFA are 0.47 points higher and 0.98 points higher than MTUM’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. MTUM - Annual Returns

Year EFA MTUM
2020 7.92% 29.69%
2019 21.94% 27.57%
2018 -13.83% -1.77%
2017 24.94% 37.6%
2016 0.96% 4.89%
2015 -0.9% 9.12%
2014 -5.04% 14.48%
2013 22.62% 0.0%
2012 17.22% 0.0%
2011 -12.18% 0.0%
2010 7.52% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

EFA vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $13,460 6.47%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in EFA would have resulted in a final balance of $13,460. This is a profit of $3,460 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

EFA’s CAGR is 10.90 percentage points lower than that of MTUM and as a result, would have yielded $15,841 less on a $10,000 investment. Thus, EFA performed worse than MTUM by 10.90% annually.


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