The iShares MSCI EAFE ETF (EFA) and the Vanguard Small-Cap Index Fund ETF Shares (VB) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VB is a Vanguard Small Blend fund. So, what’s the difference between EFA and VB? And which fund is better?
The expense ratio of EFA is 0.27 percentage points higher than VB’s (0.32% vs. 0.05%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VB over the past ten years.
In this article, we’ll compare EFA vs. VB. We’ll look at fund composition and portfolio growth, as well as at their industry exposure and holdings. Moreover, I’ll also discuss EFA’s and VB’s risk metrics, performance, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Small-Cap Index Fund ETF Shares|
|Category||Foreign Large Blend||Small 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 Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
EFA’s dividend yield is 1.14% higher than that of VB (2.28% vs. 1.14%). Also, EFA yielded on average 7.78% less per year over the past decade (6.47% vs. 14.25%). The expense ratio of EFA is 0.27 percentage points higher than VB’s (0.32% vs. 0.05%).
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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 Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.
VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.
EFA is 3.82% more exposed to the Financial Services sector than VB (16.88% vs 13.06%). EFA’s exposure to Industrials and Healthcare stocks is 1.10% lower and 1.54% lower respectively (15.01% vs. 16.11% and 12.8% vs. 14.34%). In total, Utilities, Energy, and Communication Services also make up 4.28% more of the fund’s holdings compared to VB (12.54% vs. 8.26%).
|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%.
|Charles River Laboratories International Inc||0.34%|
|Diamondback Energy Inc||0.31%|
|VICI Properties Inc Ordinary Shares||0.3%|
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
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The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a Treynor Ratio of 5.33 and a Standard Deviation of 15.01. Its Mean Return is 0.57 while EFA’s Alpha is 0.47. Furthermore, the fund has a R-squared of 96.78 and a Sharpe Ratio of 0.41.
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Treynor Ratio of 10.15 and a Mean Return of 1.15. Its Sharpe Ratio is 0.74 while VB’s Alpha is -4.02. Furthermore, the fund has a Beta of 1.21 and a R-squared of 85.03.
EFA’s Mean Return is 0.58 points lower than that of VB and its R-squared is 11.75 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VB. The Alpha and Beta of EFA are 4.49 points higher and 0.23 points lower than VB’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 VB, returning 37.8% on an annual basis. The poorest year for VB in the last ten years was 2018, with a yield of -9.3%. Most years the Vanguard Small-Cap Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2016, when gains were 16.24%, 18.22%, and 18.31% 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 VB, the end total would have been $39,734. This equates to a $29,734 profit over 11 years and a compound annual growth rate (CAGR) of 14.25%.
EFA’s CAGR is 7.78 percentage points lower than that of VB and as a result, would have yielded $21,465 less on a $10,000 investment. Thus, EFA performed worse than VB by 7.78% annually.
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