The iShares MSCI EAFE ETF (EFA) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between EFA and VGK? And which fund is better?
The expense ratio of EFA is 0.24 percentage points higher than VGK’s (0.32% vs. 0.08%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VGK over the past ten years.
In this article, we’ll compare EFA vs. VGK. We’ll look at industry exposure and annual returns, as well as at their performance and holdings. Moreover, I’ll also discuss EFA’s and VGK’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard FTSE Europe Index Fund ETF Shares|
|Category||Foreign Large Blend||Europe Stock|
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 Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
EFA’s dividend yield is 0.24% lower than that of VGK (2.28% vs. 2.52%). Also, EFA yielded on average 0.21% less per year over the past decade (6.47% vs. 6.68%). The expense ratio of EFA is 0.24 percentage points higher than VGK’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).
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 Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.
VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.
EFA is 1.03% more exposed to the Financial Services sector than VGK (16.88% vs 15.85%). EFA’s exposure to Industrials and Healthcare stocks is 0.57% lower and 0.96% lower respectively (15.01% vs. 15.58% and 12.8% vs. 13.76%). In total, Utilities, Energy, and Communication Services also make up 0.74% less of the fund’s holdings compared to VGK (12.54% vs. 13.28%).
|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%.
|ASML Holding NV||2.2%|
|Roche Holding AG||2.13%|
|LVMH Moet Hennessy Louis Vuitton SE||1.58%|
|Novo Nordisk A/S B||1.09%|
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
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).
The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a Alpha of 0.47 and a Beta of 0.98. Its Mean Return is 0.57 while EFA’s Sharpe Ratio is 0.41. Furthermore, the fund has a Treynor Ratio of 5.33 and a R-squared of 96.78.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Mean Return of 0.61 with a Beta of 1.06 and a R-squared of 92.76. Its Standard Deviation is 16.65 while VGK’s Sharpe Ratio is 0.4. Furthermore, the fund has a Treynor Ratio of 5.12 and a Alpha of 0.45.
EFA’s Mean Return is 0.04 points lower than that of VGK and its R-squared is 4.02 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VGK. The Alpha and Beta of EFA are 0.02 points higher and 0.08 points lower than VGK’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
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 VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% 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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.
EFA’s CAGR is 0.21 percentage points lower than that of VGK and as a result, would have yielded $81 less on a $10,000 investment. Thus, EFA performed worse than VGK by 0.21% annually.
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) 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!
2) 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!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.