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.

Summary

IEFA IWM
Name iShares Core MSCI EAFE ETF iShares Russell 2000 ETF
Category Foreign Large Blend Small Blend
Issuer iShares iShares
AUM 95.78B 66.48B
Avg. Return 5.79% 13.52%
Div. Yield 2.28% 0.86%
Expense Ratio 0.07% 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

IEFA IWM
Technology 9.81% 14.21%
Industrials 16.32% 14.78%
Energy 3.19% 3.74%
Communication Services 5.53% 3.79%
Utilities 3.25% 2.44%
Healthcare 12.01% 20.3%
Consumer Defensive 9.78% 3.65%
Real Estate 4.31% 8.59%
Financial Services 15.91% 13.76%
Consumer Cyclical 11.96% 10.99%
Basic Materials 7.93% 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 Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

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 Holdings Weight
AMC Entertainment Holdings Inc Class A 0.52%
Intellia Therapeutics Inc 0.33%
Crocs Inc 0.3%
BlackRock Cash Funds Treasury SL Agency 0.29%
Tenet Healthcare Corp 0.26%
Lattice Semiconductor Corp 0.26%
Tetra Tech Inc 0.25%
II-VI Inc 0.25%
EastGroup Properties Inc 0.24%
Arrowhead Pharmaceuticals Inc 0.24%

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

Year IEFA IWM
2020 8.55% 19.89%
2019 22.67% 25.42%
2018 -14.2% -11.02%
2017 26.42% 14.66%
2016 1.36% 21.36%
2015 0.53% -4.33%
2014 -4.82% 4.94%
2013 23.73% 38.85%
2012 0.0% 16.39%
2011 0.0% -4.19%
2010 0.0% 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

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
IWM $10,000 $18,691 13.52%

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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