The iShares MSCI EAFE ETF (EFA) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between EFA and XLC? And which fund is better?
The expense ratio of EFA is 0.20 percentage points higher than XLC’s (0.32% vs. 0.12%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than XLC over the past ten years.
In this article, we’ll compare EFA vs. XLC. We’ll look at industry exposure and annual returns, as well as at their performance and risk metrics. Moreover, I’ll also discuss EFA’s and XLC’s holdings, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Communication Services Select Sector SPDR Fund|
|Category||Foreign Large Blend||Communications|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.
EFA’s dividend yield is 1.66% higher than that of XLC (2.28% vs. 0.62%). Also, EFA yielded on average 22.57% less per year over the past decade (6.47% vs. 29.04%). The expense ratio of EFA is 0.20 percentage points higher than XLC’s (0.32% vs. 0.12%).
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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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
EFA is 16.88% more exposed to the Financial Services sector than XLC (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 15.01% higher and 12.80% higher respectively (15.01% vs. 0.0% and 12.8% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 87.46% less of the fund’s holdings compared to XLC (12.54% vs. 100.00%).
|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%.
|Facebook Inc A||23.75%|
|Alphabet Inc A||11.49%|
|Alphabet Inc Class C||11.16%|
|Charter Communications Inc A||4.65%|
|Comcast Corp Class A||4.44%|
|T-Mobile US Inc||4.41%|
|The Walt Disney Co||4.39%|
|Verizon Communications Inc||4.33%|
XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.
Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.
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The iShares MSCI EAFE ETF (EFA) has a Treynor Ratio of 5.33 with a Standard Deviation of 15.01 and a R-squared of 96.78. Its Sharpe Ratio is 0.41 while EFA’s Alpha is 0.47. Furthermore, the fund has a Beta of 0.98 and a Mean Return of 0.57.
The Communication Services Select Sector SPDR Fund (XLC) has a Standard Deviation of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Beta is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.
EFA’s Mean Return is 0.57 points higher than that of XLC and its R-squared is 96.78 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than XLC. The Alpha and Beta of EFA are 0.47 points higher and 0.98 points higher than XLC’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 XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFA would have resulted in a final balance of $13,159. This is a profit of $3,159 over 2 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.
EFA’s CAGR is 22.57 percentage points lower than that of XLC and as a result, would have yielded $3,486 less on a $10,000 investment. Thus, EFA performed worse than XLC by 22.57% annually.
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