EFA vs. TQQQ: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between EFA and TQQQ? And which fund is better?

The expense ratio of EFA is 0.63 percentage points lower than TQQQ’s (0.32% vs. 0.95%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than TQQQ over the past ten years.

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

Summary

EFA TQQQ
Name iShares MSCI EAFE ETF ProShares UltraPro QQQ
Category Foreign Large Blend Trading–Leveraged Equity
Issuer iShares ProShares
AUM 56.77B 12.41B
Avg. Return 6.47% 61.22%
Div. Yield 2.28% 0.0%
Expense Ratio 0.32% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

EFA’s dividend yield is 2.28% higher than that of TQQQ (2.28% vs. 0.0%). Also, EFA yielded on average 54.75% less per year over the past decade (6.47% vs. 61.22%). The expense ratio of EFA is 0.63 percentage points lower than TQQQ’s (0.32% vs. 0.95%).

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Fund Composition

Industry Exposure

EFA vs. TQQQ - Industry Exposure

EFA TQQQ
Technology 9.68% 0.0%
Industrials 15.01% 0.0%
Energy 3.51% 0.0%
Communication Services 5.68% 0.0%
Utilities 3.35% 0.0%
Healthcare 12.8% 0.0%
Consumer Defensive 10.56% 0.0%
Real Estate 3.01% 0.0%
Financial Services 16.88% 0.0%
Consumer Cyclical 11.62% 0.0%
Basic Materials 7.91% 0.0%

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 ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

EFA is 16.88% more exposed to the Financial Services sector than TQQQ (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 15.01% higher and 12.80% higher respectively (15.01% vs. 0.0% and 12.8% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 12.54% more of the fund’s holdings compared to TQQQ (12.54% vs. 0.00%).

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%.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

EFA TQQQ
Mean Return 0.57 4.65
R-squared 96.78 83.64
Std. Deviation 15.01 50.08
Alpha 0.47 7.29
Beta 0.98 3.37
Sharpe Ratio 0.41 1.1
Treynor Ratio 5.33 15.65

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

The ProShares UltraPro QQQ (TQQQ) has a Mean Return of 4.65 with a Beta of 3.37 and a R-squared of 83.64. Its Treynor Ratio is 15.65 while TQQQ’s Sharpe Ratio is 1.1. Furthermore, the fund has a Alpha of 7.29 and a Standard Deviation of 50.08.

EFA’s Mean Return is 4.08 points lower than that of TQQQ and its R-squared is 13.14 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than TQQQ. The Alpha and Beta of EFA are 6.82 points lower and 2.39 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. TQQQ - Annual Returns

Year EFA TQQQ
2020 7.92% 109.85%
2019 21.94% 133.93%
2018 -13.83% -19.65%
2017 24.94% 118.65%
2016 0.96% 11.04%
2015 -0.9% 17.41%
2014 -5.04% 56.82%
2013 22.62% 139.98%
2012 17.22% 51.95%
2011 -12.18% -7.77%
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 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

EFA vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $16,991 6.47%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in EFA would have resulted in a final balance of $16,991. This is a profit of $6,991 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

EFA’s CAGR is 54.75 percentage points lower than that of TQQQ and as a result, would have yielded $576,021 less on a $10,000 investment. Thus, EFA performed worse than TQQQ by 54.75% annually.


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