The iShares MSCI EAFE ETF (EFA) and the Vanguard Information Technology Index Fund ETF Shares (VGT) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VGT is a Vanguard Technology fund. So, what’s the difference between EFA and VGT? And which fund is better?
The expense ratio of EFA is 0.22 percentage points higher than VGT’s (0.32% vs. 0.1%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VGT over the past ten years.
In this article, we’ll compare EFA vs. VGT. We’ll look at annual returns and performance, as well as at their risk metrics and holdings. Moreover, I’ll also discuss EFA’s and VGT’s fund composition, industry exposure, and portfolio growth and examine how these affect their overall returns.
Summary
| EFA | VGT | |
| Name | iShares MSCI EAFE ETF | Vanguard Information Technology Index Fund ETF Shares |
| Category | Foreign Large Blend | Technology |
| Issuer | iShares | Vanguard |
| AUM | 56.77B | 54.13B |
| Avg. Return | 6.47% | 20.84% |
| Div. Yield | 2.28% | 0.66% |
| Expense Ratio | 0.32% | 0.1% |
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 Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
EFA’s dividend yield is 1.62% higher than that of VGT (2.28% vs. 0.66%). Also, EFA yielded on average 14.37% less per year over the past decade (6.47% vs. 20.84%). The expense ratio of EFA is 0.22 percentage points higher than VGT’s (0.32% vs. 0.1%).
Fund Composition
Industry Exposure
| EFA | VGT | |
| Technology | 9.68% | 88.89% |
| Industrials | 15.01% | 1.67% |
| Energy | 3.51% | 0.0% |
| Communication Services | 5.68% | 0.61% |
| Utilities | 3.35% | 0.0% |
| Healthcare | 12.8% | 0.0% |
| Consumer Defensive | 10.56% | 0.0% |
| Real Estate | 3.01% | 0.0% |
| Financial Services | 16.88% | 8.83% |
| Consumer Cyclical | 11.62% | 0.0% |
| Basic Materials | 7.91% | 0.0% |
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 Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.
EFA is 8.05% more exposed to the Financial Services sector than VGT (16.88% vs 8.83%). EFA’s exposure to Industrials and Healthcare stocks is 13.34% higher and 12.80% higher respectively (15.01% vs. 1.67% and 12.8% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 11.93% more of the fund’s holdings compared to VGT (12.54% vs. 0.61%).
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%.
| VGT Holdings | Weight |
| Apple Inc | 19.58% |
| Microsoft Corp | 16.53% |
| NVIDIA Corp | 4.22% |
| Visa Inc Class A | 3.16% |
| PayPal Holdings Inc | 2.76% |
| Mastercard Inc Class A | 2.76% |
| Adobe Inc | 2.39% |
| Intel Corp | 1.94% |
| Salesforce.com Inc | 1.91% |
| Cisco Systems Inc | 1.9% |
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
Risk Analysis
| EFA | VGT | |
| Mean Return | 0.57 | 1.76 |
| R-squared | 96.78 | 74.84 |
| Std. Deviation | 15.01 | 16.61 |
| Alpha | 0.47 | 10.41 |
| Beta | 0.98 | 1.02 |
| Sharpe Ratio | 0.41 | 1.23 |
| Treynor Ratio | 5.33 | 20.55 |
The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Alpha of 0.47 and a Beta of 0.98. Its Standard Deviation is 15.01 while EFA’s Treynor Ratio is 5.33. Furthermore, the fund has a Sharpe Ratio of 0.41 and a R-squared of 96.78.
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Beta of 1.02 with a Alpha of 10.41 and a Mean Return of 1.76. Its Standard Deviation is 16.61 while VGT’s R-squared is 74.84. Furthermore, the fund has a Treynor Ratio of 20.55 and a Sharpe Ratio of 1.23.
EFA’s Mean Return is 1.19 points lower than that of VGT and its R-squared is 21.94 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VGT. The Alpha and Beta of EFA are 9.94 points lower and 0.04 points lower than VGT’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | VGT |
| 2020 | 7.92% | 45.94% |
| 2019 | 21.94% | 48.68% |
| 2018 | -13.83% | 2.52% |
| 2017 | 24.94% | 37.07% |
| 2016 | 0.96% | 13.73% |
| 2015 | -0.9% | 5.02% |
| 2014 | -5.04% | 18.01% |
| 2013 | 22.62% | 30.91% |
| 2012 | 17.22% | 14.05% |
| 2011 | -12.18% | 0.52% |
| 2010 | 7.52% | 12.74% |
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 VGT, returning 48.68% on an annual basis. The poorest year for VGT in the last ten years was 2011, with a yield of 0.52%. Most years the Vanguard Information Technology Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 13.73%, 14.05%, and 18.01% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| VGT | $10,000 | $72,718 | 20.84% |
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 VGT, the end total would have been $72,718. This equates to a $62,718 profit over 11 years and a compound annual growth rate (CAGR) of 20.84%.
EFA’s CAGR is 14.37 percentage points lower than that of VGT and as a result, would have yielded $54,449 less on a $10,000 investment. Thus, EFA performed worse than VGT by 14.37% annually.
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