The iShares MSCI EAFE ETF (EFA) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and RSP is a Invesco Large Blend fund. So, what’s the difference between EFA and RSP? And which fund is better?
The expense ratio of EFA is 0.12 percentage points higher than RSP’s (0.32% vs. 0.2%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than RSP over the past ten years.
In this article, we’ll compare EFA vs. RSP. We’ll look at annual returns and holdings, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss EFA’s and RSP’s risk metrics, performance, and fund composition and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Invesco S&P 500 Equal Weight ETF|
|Category||Foreign Large Blend||Large Blend|
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 Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
EFA’s dividend yield is 0.97% higher than that of RSP (2.28% vs. 1.31%). Also, EFA yielded on average 7.32% less per year over the past decade (6.47% vs. 13.79%). The expense ratio of EFA is 0.12 percentage points higher than RSP’s (0.32% vs. 0.2%).
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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 Invesco S&P 500 Equal Weight ETF (RSP) has the most exposure to the Technology sector at 14.73%. This is followed by Industrials and Healthcare at 14.62% and 13.69% respectively. Basic Materials (4.04%), Communication Services (4.31%), and Utilities (5.58%) only make up 13.93% of the fund’s total assets.
RSP’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Consumer Cyclical, Financial Services, and Healthcare stocks at 5.84%, 6.86%, 13.01%, 13.43%, and 13.69%.
EFA is 3.45% more exposed to the Financial Services sector than RSP (16.88% vs 13.43%). EFA’s exposure to Industrials and Healthcare stocks is 0.39% higher and 0.89% lower respectively (15.01% vs. 14.62% and 12.8% vs. 13.69%). In total, Utilities, Energy, and Communication Services also make up 1.25% less of the fund’s holdings compared to RSP (12.54% vs. 13.79%).
|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%.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
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The iShares MSCI EAFE ETF (EFA) has a Sharpe Ratio of 0.41 with a R-squared of 96.78 and a Standard Deviation of 15.01. Its Mean Return is 0.57 while EFA’s Beta is 0.98. Furthermore, the fund has a Alpha of 0.47 and a Treynor Ratio of 5.33.
The Invesco S&P 500 Equal Weight ETF (RSP) has a Mean Return of 1.19 with a Standard Deviation of 15.36 and a Treynor Ratio of 12.12. Its Sharpe Ratio is 0.89 while RSP’s Beta is 1.1. Furthermore, the fund has a Alpha of -2.45 and a R-squared of 94.47.
EFA’s Mean Return is 0.62 points lower than that of RSP and its R-squared is 2.31 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than RSP. The Alpha and Beta of EFA are 2.92 points higher and 0.12 points lower than RSP’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 2013 was the strongest year for RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% 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 RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
EFA’s CAGR is 7.32 percentage points lower than that of RSP and as a result, would have yielded $20,395 less on a $10,000 investment. Thus, EFA performed worse than RSP by 7.32% annually.
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