Skip to content

EFA vs. VEU: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between EFA and VEU? And which fund is better?

The expense ratio of EFA is 0.24 percentage points higher than VEU’s (0.32% vs. 0.08%). EFA also has a lower exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VEU over the past ten years.

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

EFAVEU
NameiShares MSCI EAFE ETFVanguard FTSE All-World ex-US Index Fund ETF Shares
CategoryForeign Large BlendForeign Large Blend
IssueriSharesVanguard
AUM56.77B53.64B
Avg. Return6.47%6.64%
Div. Yield2.28%2.31%
Expense Ratio0.32%0.08%

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 FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

EFA’s dividend yield is 0.03% lower than that of VEU (2.28% vs. 2.31%). Also, EFA yielded on average 0.17% less per year over the past decade (6.47% vs. 6.64%). The expense ratio of EFA is 0.24 percentage points higher than VEU’s (0.32% vs. 0.08%).

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. VEU - Industry Exposure

EFAVEU
Technology9.68%12.94%
Industrials15.01%12.19%
Energy3.51%4.69%
Communication Services5.68%7.44%
Utilities3.35%2.89%
Healthcare12.8%9.34%
Consumer Defensive10.56%8.28%
Real Estate3.01%3.04%
Financial Services16.88%18.46%
Consumer Cyclical11.62%12.57%
Basic Materials7.91%8.17%

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 FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

EFA is 1.58% less exposed to the Financial Services sector than VEU (16.88% vs 18.46%). EFA’s exposure to Industrials and Healthcare stocks is 2.82% higher and 3.46% higher respectively (15.01% vs. 12.19% and 12.8% vs. 9.34%). In total, Utilities, Energy, and Communication Services also make up 2.48% less of the fund’s holdings compared to VEU (12.54% vs. 15.02%).

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%.

VEU - Holdings

VEU HoldingsWeight
Tencent Holdings Ltd1.57%
Alibaba Group Holding Ltd Ordinary Shares1.4%
Nestle SA1.22%
Taiwan Semiconductor Manufacturing Co Ltd0.98%
ASML Holding NV0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR0.91%
Roche Holding AG0.91%
Toyota Motor Corp0.75%
LVMH Moet Hennessy Louis Vuitton SE0.68%
Novartis AG0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

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

EFAVEU
Mean Return0.570.56
R-squared96.7898.44
Std. Deviation15.0115.08
Alpha0.470.28
Beta0.980.99
Sharpe Ratio0.410.4
Treynor Ratio5.335.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Standard Deviation of 15.08 with a Treynor Ratio of 5.12 and a Mean Return of 0.56. Its Beta is 0.99 while VEU’s R-squared is 98.44. Furthermore, the fund has a Sharpe Ratio of 0.4 and a Alpha of 0.28.

EFA’s Mean Return is 0.01 points higher than that of VEU and its R-squared is 1.66 points lower. With a Standard Deviation of 15.01, EFA is slightly less volatile than VEU. The Alpha and Beta of EFA are 0.19 points higher and 0.01 points lower than VEU’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. VEU - Annual Returns

YearEFAVEU
20207.92%11.39%
201921.94%21.63%
2018-13.83%-13.97%
201724.94%27.27%
20160.96%4.77%
2015-0.9%-4.67%
2014-5.04%-4.05%
201322.62%14.5%
201217.22%18.55%
2011-12.18%-14.25%
20107.52%11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

EFA vs. VEU - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EFA$10,000$18,2696.47%
VEU$10,000$18,5076.64%

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 VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.

EFA’s CAGR is 0.17 percentage points lower than that of VEU and as a result, would have yielded $238 less on a $10,000 investment. Thus, EFA performed worse than VEU by 0.17% 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.