EFA vs. VYM: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and VYM is a Vanguard Large Value fund. So, what’s the difference between EFA and VYM? And which fund is better?

The expense ratio of EFA is 0.26 percentage points higher than VYM’s (0.32% vs. 0.06%). EFA also has a lower exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than VYM over the past ten years.

In this article, we’ll compare EFA vs. VYM. We’ll look at holdings and industry exposure, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss EFA’s and VYM’s performance, risk metrics, and annual returns and examine how these affect their overall returns.

Summary

EFA VYM
Name iShares MSCI EAFE ETF Vanguard High Dividend Yield Index Fund ETF Shares
Category Foreign Large Blend Large Value
Issuer iShares Vanguard
AUM 56.77B 48.5B
Avg. Return 6.47% 12.20%
Div. Yield 2.28% 2.79%
Expense Ratio 0.32% 0.06%

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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

EFA’s dividend yield is 0.51% lower than that of VYM (2.28% vs. 2.79%). Also, EFA yielded on average 5.73% less per year over the past decade (6.47% vs. 12.20%). The expense ratio of EFA is 0.26 percentage points higher than VYM’s (0.32% vs. 0.06%).

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Fund Composition

Industry Exposure

EFA vs. VYM - Industry Exposure

EFA VYM
Technology 9.68% 9.77%
Industrials 15.01% 10.14%
Energy 3.51% 7.12%
Communication Services 5.68% 5.91%
Utilities 3.35% 7.27%
Healthcare 12.8% 13.61%
Consumer Defensive 10.56% 14.13%
Real Estate 3.01% 0.02%
Financial Services 16.88% 22.05%
Consumer Cyclical 11.62% 5.57%
Basic Materials 7.91% 4.41%

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 High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.

VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.

EFA is 5.17% less exposed to the Financial Services sector than VYM (16.88% vs 22.05%). EFA’s exposure to Industrials and Healthcare stocks is 4.87% higher and 0.81% lower respectively (15.01% vs. 10.14% and 12.8% vs. 13.61%). In total, Utilities, Energy, and Communication Services also make up 7.76% less of the fund’s holdings compared to VYM (12.54% vs. 20.30%).

Holdings

EFA - 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%.

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

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Risk Analysis

EFA VYM
Mean Return 0.57 1.04
R-squared 96.78 88.88
Std. Deviation 15.01 12.69
Alpha 0.47 -0.7
Beta 0.98 0.88
Sharpe Ratio 0.41 0.93
Treynor Ratio 5.33 13.24

The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a Beta of 0.98 and a Alpha of 0.47. Its R-squared is 96.78 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Treynor Ratio of 5.33 and a Sharpe Ratio of 0.41.

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Mean Return of 1.04 with a Standard Deviation of 12.69 and a Alpha of -0.7. Its R-squared is 88.88 while VYM’s Sharpe Ratio is 0.93. Furthermore, the fund has a Beta of 0.88 and a Treynor Ratio of 13.24.

EFA’s Mean Return is 0.47 points lower than that of VYM and its R-squared is 7.90 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than VYM. The Alpha and Beta of EFA are 1.17 points higher and 0.10 points higher than VYM’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. VYM - Annual Returns

Year EFA VYM
2020 7.92% 1.14%
2019 21.94% 24.2%
2018 -13.83% -5.87%
2017 24.94% 16.42%
2016 0.96% 16.87%
2015 -0.9% 0.33%
2014 -5.04% 13.47%
2013 22.62% 30.26%
2012 17.22% 12.68%
2011 -12.18% 10.5%
2010 7.52% 14.17%

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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.

Portfolio Growth

EFA vs. VYM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
VYM $10,000 $33,914 12.20%

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 VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.

EFA’s CAGR is 5.73 percentage points lower than that of VYM and as a result, would have yielded $15,645 less on a $10,000 investment. Thus, EFA performed worse than VYM by 5.73% annually.


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