The iShares MSCI EAFE ETF (EFA) and the Vanguard Total World Stock Index Fund ETF Shares (VT) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VT is a Vanguard N/A fund. So, what’s the difference between EFA and VT? And which fund is better?
The expense ratio of EFA is 0.24 percentage points higher than VT’s (0.32% vs. 0.08%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than VT over the past ten years.
In this article, we’ll compare EFA vs. VT. We’ll look at industry exposure and performance, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EFA’s and VT’s holdings, annual returns, and risk metrics and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Total World Stock Index Fund ETF Shares|
|Category||Foreign Large Blend||N/A|
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 Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.
EFA’s dividend yield is 0.63% higher than that of VT (2.28% vs. 1.65%). Also, EFA yielded on average 3.95% less per year over the past decade (6.47% vs. 10.42%). The expense ratio of EFA is 0.24 percentage points higher than VT’s (0.32% vs. 0.08%).
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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 Total World Stock Index Fund ETF Shares (VT) has the most exposure to the Technology sector at 19.63%. This is followed by Financial Services and Consumer Cyclical at 15.36% and 12.32% respectively. Energy (3.48%), Real Estate (3.64%), and Basic Materials (4.97%) only make up 12.09% of the fund’s total assets.
VT’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Industrials, Healthcare, and Consumer Cyclical stocks at 6.71%, 9.02%, 10.7%, 11.58%, and 12.32%.
EFA is 1.52% more exposed to the Financial Services sector than VT (16.88% vs 15.36%). EFA’s exposure to Industrials and Healthcare stocks is 4.31% higher and 1.22% higher respectively (15.01% vs. 10.7% and 12.8% vs. 11.58%). In total, Utilities, Energy, and Communication Services also make up 2.56% less of the fund’s holdings compared to VT (12.54% vs. 15.10%).
|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%.
|Facebook Inc Class A||1.1%|
|Alphabet Inc Class A||0.97%|
|Alphabet Inc Class C||0.95%|
|JPMorgan Chase & Co||0.62%|
|Tencent Holdings Ltd||0.6%|
VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.
Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.
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The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a R-squared of 96.78 and a Alpha of 0.47. Its Treynor Ratio is 5.33 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Standard Deviation of 15.01 and a Sharpe Ratio of 0.41.
The Vanguard Total World Stock Index Fund ETF Shares (VT) has a R-squared of 99.35 with a Mean Return of 0.9 and a Alpha of 0.2. Its Standard Deviation is 14.19 while VT’s Beta is 1.01. Furthermore, the fund has a Treynor Ratio of 9.5 and a Sharpe Ratio of 0.71.
EFA’s Mean Return is 0.33 points lower than that of VT and its R-squared is 2.57 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than VT. The Alpha and Beta of EFA are 0.27 points higher and 0.03 points lower than VT’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 2019 was the strongest year for VT, returning 26.8% on an annual basis. The poorest year for VT in the last ten years was 2018, with a yield of -9.67%. Most years the Vanguard Total World Stock Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 8.77%, 13.05%, and 16.74% 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 VT, the end total would have been $27,739. This equates to a $17,739 profit over 11 years and a compound annual growth rate (CAGR) of 10.42%.
EFA’s CAGR is 3.95 percentage points lower than that of VT and as a result, would have yielded $9,470 less on a $10,000 investment. Thus, EFA performed worse than VT by 3.95% annually.
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