The iShares MSCI EAFE ETF (EFA) and the Vanguard Mid-Cap Index Fund ETF Shares (VO) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VO is a Vanguard Mid-Cap Blend fund. So, what’s the difference between EFA and VO? And which fund is better?
The expense ratio of EFA is 0.28 percentage points higher than VO’s (0.32% vs. 0.04%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than VO over the past ten years.
In this article, we’ll compare EFA vs. VO. We’ll look at fund composition and holdings, as well as at their performance and industry exposure. Moreover, I’ll also discuss EFA’s and VO’s risk metrics, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Mid-Cap Index Fund ETF Shares|
|Category||Foreign Large Blend||Mid-Cap Blend|
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 Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.
EFA’s dividend yield is 1.05% higher than that of VO (2.28% vs. 1.23%). Also, EFA yielded on average 7.87% less per year over the past decade (6.47% vs. 14.34%). The expense ratio of EFA is 0.28 percentage points higher than VO’s (0.32% vs. 0.04%).
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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 Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.
VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.
EFA is 5.80% more exposed to the Financial Services sector than VO (16.88% vs 11.08%). EFA’s exposure to Industrials and Healthcare stocks is 3.09% higher and 0.23% lower respectively (15.01% vs. 11.92% and 12.8% vs. 13.03%). In total, Utilities, Energy, and Communication Services also make up 2.01% less of the fund’s holdings compared to VO (12.54% vs. 14.55%).
|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%.
|IDEXX Laboratories Inc||0.78%|
|Marvell Technology Inc||0.68%|
|IQVIA Holdings Inc||0.68%|
|Chipotle Mexican Grill Inc||0.63%|
|Veeva Systems Inc Class A||0.62%|
|Digital Realty Trust Inc||0.62%|
|Carrier Global Corp Ordinary Shares||0.61%|
VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.
Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.
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The iShares MSCI EAFE ETF (EFA) has a Treynor Ratio of 5.33 with a R-squared of 96.78 and a Mean Return of 0.57. Its Alpha is 0.47 while EFA’s Sharpe Ratio is 0.41. Furthermore, the fund has a Standard Deviation of 15.01 and a Beta of 0.98.
The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Standard Deviation of 15.65 with a Beta of 1.11 and a Treynor Ratio of 11.32. Its Mean Return is 1.14 while VO’s Alpha is -2.71. Furthermore, the fund has a Sharpe Ratio of 0.83 and a R-squared of 92.22.
EFA’s Mean Return is 0.57 points lower than that of VO and its R-squared is 4.56 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than VO. The Alpha and Beta of EFA are 3.18 points higher and 0.13 points lower than VO’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 VO, returning 35.15% on an annual basis. The poorest year for VO in the last ten years was 2018, with a yield of -9.21%. Most years the Vanguard Mid-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2020, when gains were 13.76%, 15.98%, and 18.22% 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 VO, the end total would have been $40,404. This equates to a $30,404 profit over 11 years and a compound annual growth rate (CAGR) of 14.34%.
EFA’s CAGR is 7.87 percentage points lower than that of VO and as a result, would have yielded $22,135 less on a $10,000 investment. Thus, EFA performed worse than VO by 7.87% annually.
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