EFA vs. VBK: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between EFA and VBK? And which fund is better?

The expense ratio of EFA is 0.25 percentage points higher than VBK’s (0.32% vs. 0.07%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VBK over the past ten years.

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

Summary

EFA VBK
Name iShares MSCI EAFE ETF Vanguard Small-Cap Growth Index Fund ETF Shares
Category Foreign Large Blend Small Growth
Issuer iShares Vanguard
AUM 56.77B 37.89B
Avg. Return 6.47% 16.53%
Div. Yield 2.28% 0.45%
Expense Ratio 0.32% 0.07%

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 Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

EFA’s dividend yield is 1.83% higher than that of VBK (2.28% vs. 0.45%). Also, EFA yielded on average 10.06% less per year over the past decade (6.47% vs. 16.53%). The expense ratio of EFA is 0.25 percentage points higher than VBK’s (0.32% vs. 0.07%).

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Fund Composition

Industry Exposure

EFA vs. VBK - Industry Exposure

EFA VBK
Technology 9.68% 27.87%
Industrials 15.01% 13.19%
Energy 3.51% 1.77%
Communication Services 5.68% 3.24%
Utilities 3.35% 0.32%
Healthcare 12.8% 23.24%
Consumer Defensive 10.56% 3.83%
Real Estate 3.01% 7.87%
Financial Services 16.88% 4.05%
Consumer Cyclical 11.62% 12.13%
Basic Materials 7.91% 2.49%

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 Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

EFA is 12.83% more exposed to the Financial Services sector than VBK (16.88% vs 4.05%). EFA’s exposure to Industrials and Healthcare stocks is 1.82% higher and 10.44% lower respectively (15.01% vs. 13.19% and 12.8% vs. 23.24%). In total, Utilities, Energy, and Communication Services also make up 7.21% more of the fund’s holdings compared to VBK (12.54% vs. 5.33%).

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%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

EFA VBK
Mean Return 0.57 1.22
R-squared 96.78 80.56
Std. Deviation 15.01 17.95
Alpha 0.47 -2.81
Beta 0.98 1.18
Sharpe Ratio 0.41 0.78
Treynor Ratio 5.33 11.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Alpha of -2.81 with a R-squared of 80.56 and a Standard Deviation of 17.95. Its Treynor Ratio is 11.18 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a Mean Return of 1.22 and a Beta of 1.18.

EFA’s Mean Return is 0.65 points lower than that of VBK and its R-squared is 16.22 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VBK. The Alpha and Beta of EFA are 3.28 points higher and 0.20 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. VBK - Annual Returns

Year EFA VBK
2020 7.92% 35.29%
2019 21.94% 32.75%
2018 -13.83% -5.68%
2017 24.94% 21.9%
2016 0.96% 10.74%
2015 -0.9% -2.51%
2014 -5.04% 4.02%
2013 22.62% 38.18%
2012 17.22% 17.67%
2011 -12.18% -1.43%
2010 7.52% 30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

EFA vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
VBK $10,000 $48,639 16.53%

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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

EFA’s CAGR is 10.06 percentage points lower than that of VBK and as a result, would have yielded $30,370 less on a $10,000 investment. Thus, EFA performed worse than VBK by 10.06% annually.


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