EFA vs. USMV: What’s The Difference?

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

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

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

Summary

EFA USMV
Name iShares MSCI EAFE ETF iShares MSCI USA Min Vol Factor ETF
Category Foreign Large Blend Large Blend
Issuer iShares iShares
AUM 56.77B 27.6B
Avg. Return 6.47% 13.89%
Div. Yield 2.28% 1.5%
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 Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

EFA’s dividend yield is 0.78% higher than that of USMV (2.28% vs. 1.5%). Also, EFA yielded on average 7.42% less per year over the past decade (6.47% vs. 13.89%). The expense ratio of EFA is 0.17 percentage points higher than USMV’s (0.32% vs. 0.15%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

EFA vs. USMV - Industry Exposure

EFA USMV
Technology 9.68% 20.53%
Industrials 15.01% 10.51%
Energy 3.51% 0.21%
Communication Services 5.68% 11.03%
Utilities 3.35% 6.93%
Healthcare 12.8% 18.42%
Consumer Defensive 10.56% 12.82%
Real Estate 3.01% 2.73%
Financial Services 16.88% 9.65%
Consumer Cyclical 11.62% 5.53%
Basic Materials 7.91% 1.65%

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 Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

EFA is 7.23% more exposed to the Financial Services sector than USMV (16.88% vs 9.65%). EFA’s exposure to Industrials and Healthcare stocks is 4.50% higher and 5.62% lower respectively (15.01% vs. 10.51% and 12.8% vs. 18.42%). In total, Utilities, Energy, and Communication Services also make up 5.63% less of the fund’s holdings compared to USMV (12.54% vs. 18.17%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

EFA USMV
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 Mean Return of 0.57 and a Beta of 0.98. Its Standard Deviation is 15.01 while EFA’s Treynor Ratio is 5.33. Furthermore, the fund has a R-squared of 96.78 and a Alpha of 0.47.

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

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

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

EFA vs. USMV - Annual Returns

Year EFA USMV
2020 7.92% 5.6%
2019 21.94% 27.77%
2018 -13.83% 1.36%
2017 24.94% 18.97%
2016 0.96% 10.5%
2015 -0.9% 5.5%
2014 -5.04% 16.34%
2013 22.62% 25.11%
2012 17.22% 11.04%
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

EFA vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $16,505 6.47%
USMV $10,000 $27,607 13.89%

A $10,000 investment in EFA would have resulted in a final balance of $16,505. This is a profit of $6,505 over 8 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

EFA’s CAGR is 7.42 percentage points lower than that of USMV and as a result, would have yielded $11,102 less on a $10,000 investment. Thus, EFA performed worse than USMV by 7.42% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply