The iShares MSCI EAFE ETF (EFA) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VHT is a Vanguard Health fund. So, what’s the difference between EFA and VHT? And which fund is better?
The expense ratio of EFA is 0.22 percentage points higher than VHT’s (0.32% vs. 0.1%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than VHT over the past ten years.
In this article, we’ll compare EFA vs. VHT. We’ll look at holdings and industry exposure, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss EFA’s and VHT’s fund composition, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Health Care Index Fund ETF Shares|
|Category||Foreign Large Blend||Health|
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
EFA’s dividend yield is 1.13% higher than that of VHT (2.28% vs. 1.15%). Also, EFA yielded on average 9.57% less per year over the past decade (6.47% vs. 16.04%). The expense ratio of EFA is 0.22 percentage points higher than VHT’s (0.32% vs. 0.1%).
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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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
EFA is 16.86% more exposed to the Financial Services sector than VHT (16.88% vs 0.02%). EFA’s exposure to Industrials and Healthcare stocks is 14.96% higher and 86.77% lower respectively (15.01% vs. 0.05% and 12.8% vs. 99.57%). In total, Utilities, Energy, and Communication Services also make up 12.54% more of the fund’s holdings compared to VHT (12.54% vs. 0.00%).
|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%.
|Johnson & Johnson||7.34%|
|UnitedHealth Group Inc||6.44%|
|Thermo Fisher Scientific Inc||3.37%|
|Merck & Co Inc||3.33%|
|Eli Lilly and Co||3.17%|
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
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The iShares MSCI EAFE ETF (EFA) has a R-squared of 96.78 with a Sharpe Ratio of 0.41 and a Beta of 0.98. Its Mean Return is 0.57 while EFA’s Alpha is 0.47. Furthermore, the fund has a Standard Deviation of 15.01 and a Treynor Ratio of 5.33.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Standard Deviation of 13.58 with a Alpha of 7.99 and a Treynor Ratio of 20.74. Its R-squared is 59.86 while VHT’s Beta is 0.75. Furthermore, the fund has a Mean Return of 1.33 and a Sharpe Ratio of 1.13.
EFA’s Mean Return is 0.76 points lower than that of VHT and its R-squared is 36.92 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than VHT. The Alpha and Beta of EFA are 7.52 points lower and 0.23 points higher than VHT’s Alpha and Beta.
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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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% 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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.
EFA’s CAGR is 9.57 percentage points lower than that of VHT and as a result, would have yielded $30,195 less on a $10,000 investment. Thus, EFA performed worse than VHT by 9.57% annually.
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