The iShares MSCI EAFE ETF (EFA) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between EFA and VTIP? And which fund is better?
The expense ratio of EFA is 0.27 percentage points higher than VTIP’s (0.32% vs. 0.05%). EFA also has a high exposure to the financial services sector while VTIP is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare EFA vs. VTIP. We’ll look at risk metrics and performance, as well as at their fund composition and annual returns. Moreover, I’ll also discuss EFA’s and VTIP’s industry exposure, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares|
|Category||Foreign Large Blend||Inflation-Protected Bond|
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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
EFA’s dividend yield is 0.93% higher than that of VTIP (2.28% vs. 1.35%). Also, EFA yielded on average 4.68% more per year over the past decade (6.47% vs. 1.79%). The expense ratio of EFA is 0.27 percentage points higher than VTIP’s (0.32% vs. 0.05%).
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|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%.
|VTIP Bond Sectors||Weight|
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Sharpe Ratio of 0.41 and a Standard Deviation of 15.01. Its R-squared is 96.78 while EFA’s Alpha is 0.47. Furthermore, the fund has a Beta of 0.98 and a Treynor Ratio of 5.33.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a R-squared of 0 with a Beta of 0 and a Sharpe Ratio of 0. Its Alpha is 0 while VTIP’s Mean Return is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.
EFA’s Mean Return is 0.57 points higher than that of VTIP and its R-squared is 96.78 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than VTIP. The Alpha and Beta of EFA are 0.47 points higher and 0.98 points higher than VTIP’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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFA would have resulted in a final balance of $13,460. This is a profit of $3,460 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
EFA’s CAGR is 4.68 percentage points higher than that of VTIP and as a result, would have yielded $2,155 more on a $10,000 investment. Thus, EFA outperformed VTIP by 4.68% annually.
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