Skip to content

EFA vs. VCIT: What’s The Difference?

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

The expense ratio of EFA is 0.27 percentage points higher than VCIT’s (0.32% vs. 0.05%). EFA also has a high exposure to the financial services sector while VCIT is mostly comprised of BBB bonds. Overall, EFA has provided higher returns than VCIT over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

EFAVCIT
NameiShares MSCI EAFE ETFVanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
CategoryForeign Large BlendCorporate Bond
IssueriSharesVanguard
AUM56.77B48.39B
Avg. Return6.47%5.84%
Div. Yield2.28%2.33%
Expense Ratio0.32%0.05%

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 Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.

EFA’s dividend yield is 0.05% lower than that of VCIT (2.28% vs. 2.33%). Also, EFA yielded on average 0.63% more per year over the past decade (6.47% vs. 5.84%). The expense ratio of EFA is 0.27 percentage points higher than VCIT’s (0.32% vs. 0.05%).

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

Holdings

EFA - Holdings

EFA HoldingsWeight
Nestle SA2.11%
ASML Holding NV1.69%
Roche Holding AG1.55%
LVMH Moet Hennessy Louis Vuitton SE1.28%
Novartis AG1.19%
Toyota Motor Corp1.09%
AstraZeneca PLC0.92%
Unilever PLC0.9%
AIA Group Ltd0.88%
SAP SE0.86%

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%.

VCIT - Holdings

VCIT Bond SectorsWeight
BBB55.28%
A37.85%
AA5.22%
AAA1.57%
Below B0.08%
Others0.0%
B0.0%
BB0.0%
US Government0.0%

VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.

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

EFAVCIT
Mean Return0.570.44
R-squared96.7863.18
Std. Deviation15.015.08
Alpha0.470.89
Beta0.981.35
Sharpe Ratio0.410.91
Treynor Ratio5.333.43

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

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Beta of 1.35 with a Alpha of 0.89 and a Mean Return of 0.44. Its Treynor Ratio is 3.43 while VCIT’s R-squared is 63.18. Furthermore, the fund has a Standard Deviation of 5.08 and a Sharpe Ratio of 0.91.

EFA’s Mean Return is 0.13 points higher than that of VCIT and its R-squared is 33.60 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than VCIT. The Alpha and Beta of EFA are 0.42 points lower and 0.37 points lower than VCIT’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

EFA vs. VCIT - Annual Returns

YearEFAVCIT
20207.92%9.55%
201921.94%13.97%
2018-13.83%-1.75%
201724.94%5.5%
20160.96%5.3%
2015-0.9%0.88%
2014-5.04%7.47%
201322.62%-1.8%
201217.22%11.36%
2011-12.18%7.94%
20107.52%10.65%

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 VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% respectively.

Portfolio Growth

EFA vs. VCIT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EFA$10,000$16,9916.47%
VCIT$10,000$17,4395.84%

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 VCIT, the end total would have been $17,439. This equates to a $7,439 profit over 10 years and a compound annual growth rate (CAGR) of 5.84%.

EFA’s CAGR is 0.63 percentage points higher than that of VCIT and as a result, would have yielded $448 less on a $10,000 investment. Thus, EFA outperformed VCIT by 0.63% 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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) 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!

3) 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!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

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

Leave a Reply

Your email address will not be published.