The iShares MSCI EAFE Value ETF (EFV) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. EFV is a iShares Foreign Large Value fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between EFV and VMBS? And which fund is better?
The expense ratio of EFV is 0.34 percentage points higher than VMBS’s (0.39% vs. 0.05%). EFV also has a high exposure to the financial services sector while VMBS is mostly comprised of AAA bonds. Overall, EFV has provided higher returns than VMBS over the past 10 years.
In this article, we’ll compare EFV vs. VMBS. We’ll look at risk metrics and holdings, as well as at their fund composition and performance. Moreover, I’ll also discuss EFV’s and VMBS’s annual returns, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI EAFE Value ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Foreign Large Value||Intermediate Government|
The iShares MSCI EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
EFV’s dividend yield is 1.71% higher than that of VMBS (2.94% vs. 1.23%). Also, EFV yielded on average 1.10% more per year over the past decade (3.99% vs. 2.89%). The expense ratio of EFV is 0.34 percentage points higher than VMBS’s (0.39% vs. 0.05%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|Toyota Motor Corp||2.21%|
|Commonwealth Bank of Australia||1.59%|
|HSBC Holdings PLC||1.4%|
|Rio Tinto PLC||1.1%|
EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.
HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares MSCI EAFE Value ETF (EFV) has a Beta of 1.05 with a R-squared of 92.15 and a Alpha of -1.77. Its Mean Return is 0.42 while EFV’s Sharpe Ratio is 0.26. Furthermore, the fund has a Treynor Ratio of 2.92 and a Standard Deviation of 16.53.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a R-squared of 65.78 with a Standard Deviation of 2.02 and a Alpha of 0.37. Its Treynor Ratio is 3.47 while VMBS’s Beta is 0.54. Furthermore, the fund has a Sharpe Ratio of 0.94 and a Mean Return of 0.21.
EFV’s Mean Return is 0.21 points higher than that of VMBS and its R-squared is 26.37 points higher. With a Standard Deviation of 16.53, EFV is slightly more volatile than VMBS. The Alpha and Beta of EFV are 2.14 points lower and 0.51 points higher than VMBS’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
EFV had its best year in 2013 with an annual return of 22.61%. EFV’s worst year over the past decade yielded -14.88% and occurred in 2018. In most years the iShares MSCI EAFE Value ETF provided moderate returns such as in 2020, 2010, and 2016 where annual returns amounted to -2.78%, 3.18%, and 4.87% respectively.
The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFV would have resulted in a final balance of $13,698. This is a profit of $3,698 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.99%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
EFV’s CAGR is 1.10 percentage points higher than that of VMBS and as a result, would have yielded $433 more on a $10,000 investment. Thus, EFV outperformed VMBS by 1.10% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.