The iShares Core MSCI EAFE ETF (IEFA) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between IEFA and IGSB? And which fund is better?
The expense ratio of IEFA is 0.01 percentage points higher than IGSB’s (0.07% vs. 0.06%). IEFA also has a high exposure to the industrials sector while IGSB is mostly comprised of BBB bonds. Overall, IEFA has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare IEFA vs. IGSB. We’ll look at risk metrics and performance, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss IEFA’s and IGSB’s portfolio growth, annual returns, and holdings and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Foreign Large Blend||Short-Term Bond|
The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
IEFA’s dividend yield is 0.26% higher than that of IGSB (2.28% vs. 2.02%). Also, IEFA yielded on average 3.28% more per year over the past decade (5.79% vs. 2.51%). The expense ratio of IEFA is 0.01 percentage points higher than IGSB’s (0.07% vs. 0.06%).
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|ASML Holding NV||1.43%|
|Roche Holding AG||1.31%|
|LVMH Moet Hennessy Louis Vuitton SE||1.08%|
|Toyota Motor Corp||0.92%|
|AIA Group Ltd||0.74%|
IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.
Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% respectively.
The year 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in IGSB, the end total would have been $11,950. This equates to a $1,950 profit over 7 years and a compound annual growth rate (CAGR) of 2.51%.
IEFA’s CAGR is 3.28 percentage points higher than that of IGSB and as a result, would have yielded $2,058 more on a $10,000 investment. Thus, IEFA outperformed IGSB by 3.28% annually.
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