The iShares MSCI EAFE ETF (EFA) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VBR is a Vanguard Small Value fund. So, what’s the difference between EFA and VBR? And which fund is better?
The expense ratio of EFA is 0.25 percentage points higher than VBR’s (0.32% vs. 0.07%). EFA also has a lower exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VBR over the past ten years.
In this article, we’ll compare EFA vs. VBR. We’ll look at risk metrics and fund composition, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss EFA’s and VBR’s performance, industry exposure, and holdings and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Small-Cap Value Index Fund ETF Shares|
|Category||Foreign Large Blend||Small Value|
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 Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
EFA’s dividend yield is 0.68% higher than that of VBR (2.28% vs. 1.6%). Also, EFA yielded on average 5.81% less per year over the past decade (6.47% vs. 12.28%). The expense ratio of EFA is 0.25 percentage points higher than VBR’s (0.32% vs. 0.07%).
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 Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.
VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.
EFA is 3.16% less exposed to the Financial Services sector than VBR (16.88% vs 20.04%). EFA’s exposure to Industrials and Healthcare stocks is 3.43% lower and 5.64% higher respectively (15.01% vs. 18.44% and 12.8% vs. 7.16%). In total, Utilities, Energy, and Communication Services also make up 1.97% more of the fund’s holdings compared to VBR (12.54% vs. 10.57%).
|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%.
|Diamondback Energy Inc||0.55%|
|VICI Properties Inc Ordinary Shares||0.54%|
|Nuance Communications Inc||0.5%|
|Molina Healthcare Inc||0.48%|
|Howmet Aerospace Inc||0.44%|
|Apollo Global Management Inc Class A||0.42%|
|Brown & Brown Inc||0.41%|
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
The iShares MSCI EAFE ETF (EFA) has a Treynor Ratio of 5.33 with a Mean Return of 0.57 and a Alpha of 0.47. Its Beta is 0.98 while EFA’s R-squared is 96.78. Furthermore, the fund has a Sharpe Ratio of 0.41 and a Standard Deviation of 15.01.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Sharpe Ratio of 0.67 with a Beta of 1.23 and a R-squared of 82.2. Its Alpha is -5.09 while VBR’s Mean Return is 1.08. Furthermore, the fund has a Treynor Ratio of 9.15 and a Standard Deviation of 18.37.
EFA’s Mean Return is 0.51 points lower than that of VBR and its R-squared is 14.58 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VBR. The Alpha and Beta of EFA are 5.56 points higher and 0.25 points lower than VBR’s Alpha and Beta.
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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% 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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
EFA’s CAGR is 5.81 percentage points lower than that of VBR and as a result, would have yielded $14,342 less on a $10,000 investment. Thus, EFA performed worse than VBR by 5.81% annually.
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