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IEFA vs. IWM: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the iShares Russell 2000 ETF (IWM) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and IWM is a iShares Small Blend fund. So, what’s the difference between IEFA and IWM? And which fund is better?

The expense ratio of IEFA is 0.12 percentage points lower than IWM’s (0.07% vs. 0.19%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than IWM over the past ten years.

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

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Summary

IEFAIWM
NameiShares Core MSCI EAFE ETFiShares Russell 2000 ETF
CategoryForeign Large BlendSmall Blend
IssueriSharesiShares
AUM95.78B66.48B
Avg. Return5.79%13.52%
Div. Yield2.28%0.86%
Expense Ratio0.07%0.19%

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 Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

IEFA’s dividend yield is 1.42% higher than that of IWM (2.28% vs. 0.86%). Also, IEFA yielded on average 7.73% less per year over the past decade (5.79% vs. 13.52%). The expense ratio of IEFA is 0.12 percentage points lower than IWM’s (0.07% vs. 0.19%).

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Fund Composition

Industry Exposure

IEFA vs. IWM - Industry Exposure

IEFAIWM
Technology9.81%14.21%
Industrials16.32%14.78%
Energy3.19%3.74%
Communication Services5.53%3.79%
Utilities3.25%2.44%
Healthcare12.01%20.3%
Consumer Defensive9.78%3.65%
Real Estate4.31%8.59%
Financial Services15.91%13.76%
Consumer Cyclical11.96%10.99%
Basic Materials7.93%3.74%

The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.

IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

IEFA is 1.54% more exposed to the Industrials sector than IWM (16.32% vs 14.78%). IEFA’s exposure to Financial Services and Healthcare stocks is 2.15% higher and 8.29% lower respectively (15.91% vs. 13.76% and 12.01% vs. 20.3%). In total, Utilities, Real Estate, and Communication Services also make up 1.73% less of the fund’s holdings compared to IWM (13.09% vs. 14.82%).

Holdings

IEFA - Holdings

IEFA HoldingsWeight
Nestle SA1.77%
ASML Holding NV1.43%
Roche Holding AG1.31%
LVMH Moet Hennessy Louis Vuitton SE1.08%
Novartis AG1.0%
Toyota Motor Corp0.92%
AstraZeneca PLC0.78%
Unilever PLC0.76%
AIA Group Ltd0.74%
SAP SE0.73%

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%.

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

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Performance

Annual Returns

IEFA vs. IWM - Annual Returns

YearIEFAIWM
20208.55%19.89%
201922.67%25.42%
2018-14.2%-11.02%
201726.42%14.66%
20161.36%21.36%
20150.53%-4.33%
2014-4.82%4.94%
201323.73%38.85%
20120.0%16.39%
20110.0%-4.19%
20100.0%26.76%

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 2013 was the strongest year for IWM, returning 38.85% on an annual basis. The poorest year for IWM in the last ten years was 2018, with a yield of -11.02%. Most years the iShares Russell 2000 ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 14.66%, 16.39%, and 19.89% respectively.

Portfolio Growth

IEFA vs. IWM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEFA$10,000$14,0085.79%
IWM$10,000$18,69113.52%

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 IWM, the end total would have been $18,691. This equates to a $8,691 profit over 7 years and a compound annual growth rate (CAGR) of 13.52%.

IEFA’s CAGR is 7.73 percentage points lower than that of IWM and as a result, would have yielded $4,683 less on a $10,000 investment. Thus, IEFA performed worse than IWM by 7.73% annually.


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