IEFA vs IXUS: Two Popular International ETFs

If you’re looking to invest in international equities, you may have come across the iShares Core MSCI EAFE ETF (IEFA) and the iShares Core MSCI Total International Stock ETF (IXUS).

Both funds are popular options for investors looking to diversify their portfolio with international exposure.

In this article, we’ll compare IEFA vs IXUS to help you decide which one is the better investment for your needs.

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IEFA and IXUS are both exchange-traded funds (ETFs) that invest in international stocks.

IEFA tracks the MSCI EAFE index, which includes large and mid-cap stocks from developed markets in Europe, Australasia, and the Far East.

IXUS, on the other hand, tracks the MSCI ACWI ex USA Investable Market index, which includes large, mid, and small-cap stocks from developed and emerging markets outside of the United States. While both funds provide exposure to international equities, they have different investment strategies and management styles.

When comparing IEFA and IXUS, it’s important to consider factors such as performance and returns, risk and volatility, costs and expenses, and fund holdings and diversification. By examining these factors, you can determine which fund aligns best with your investment goals and risk tolerance. Let’s take a closer look at how IEFA and IXUS stack up against each other.

Key Takeaways IEFA vs IXUS

  • IEFA and IXUS are both popular ETFs that provide exposure to international equities.
  • IEFA tracks the MSCI EAFE index, while IXUS tracks the MSCI ACWI ex USA Investable Market index.
  • When comparing IEFA and IXUS, it’s important to consider factors such as performance and returns, risk and volatility, costs and expenses, and fund holdings and diversification.

Overview of IEFA vs IXUS

When it comes to investing in international stocks, two popular ETFs are IEFA and IXUS. Both funds are offered by iShares, a well-known provider of ETFs. IEFA tracks the MSCI EAFE index, which includes developed markets outside of North America, while IXUS tracks the MSCI ACWI ex USA index, which includes both developed and emerging markets outside of North America.

IEFA: iShares Core MSCI EAFE ETF

IEFA is an ETF that tracks the MSCI EAFE index, which includes large and mid-cap stocks from developed markets in Europe, Australia, and the Far East. The fund has a low expense ratio of 0.07% and holds over 2,500 stocks, with the largest holdings being Nestle SA, Roche Holding AG, and Samsung Electronics Co Ltd. IEFA is a good choice for investors looking for exposure to developed international markets.

IXUS: iShares Core MSCI Total International Stock ETF

IXUS is an ETF that tracks the MSCI ACWI ex USA index, which includes large and mid-cap stocks from both developed and emerging markets outside of North America. The fund has a low expense ratio of 0.09% and holds over 3,000 stocks, with the largest holdings being Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, and Alibaba Group Holding Ltd. IXUS is a good choice for investors looking for exposure to both developed and emerging international markets.

Overall, both funds offer investors exposure to international markets outside of North America. While IEFA focuses on developed markets in Europe, Australia, and the Far East, IXUS includes both developed and emerging markets. Both funds have low expense ratios and hold a large number of stocks. It is important for investors to consider their investment goals and risk tolerance when choosing between these two ETFs.

Investment Strategy and Management IEFA vs IXUS

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When it comes to investment strategy and management, both IEFA and IXUS are passively managed index funds. This means that the funds are designed to track the performance of a specific underlying index, rather than relying on active management decisions made by a portfolio manager.

Passive Management Style

Passive management is a popular investment style because it typically results in lower fees and expenses compared to actively managed funds. In the case of IEFA and IXUS, both funds have a low expense ratio of 0.07%. This means that for every $10,000 invested, you would pay only $7 in annual fees.

Index Tracking Strategy

IEFA tracks the MSCI EAFE IMI Index, which is designed to measure the performance of large, mid, and small-cap companies in developed markets outside of North America. This index includes companies from Europe, Asia, and Australia.

On the other hand, IXUS tracks the MSCI ACWI ex USA IMI Index, which is designed to measure the performance of large, mid, and small-cap companies in developed and emerging markets outside of the United States. This index includes companies from both developed and emerging markets around the world.

Despite their differences in underlying index, both funds offer investors exposure to a diverse range of international stocks. This can provide investors with the potential for long-term growth and diversification in their portfolios.

Overall, the investment strategy and management style of IEFA and IXUS are similar. Both funds provide investors with a low-cost, passive investment option that tracks the performance of a specific underlying index.

Performance and Returns

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When it comes to comparing IEFA vs IXUS, one of the most important factors to consider is their historical performance. Both funds track the MSCI World ex USA Investable Market Index, but there are differences in their returns.

Historical Performance

Over the past 5 years, IEFA has outperformed IXUS with a 7.94% annualized return compared to IXUS’s 7.37% annualized return. However, in the past year, IXUS has outperformed IEFA with a 24.02% return compared to IEFA’s 23.52% return. In the past 3 years, IEFA has provided a 9.72% annualized return compared to IXUS’s 9.12% annualized return. Over the past 10 years, IEFA has provided a 4.37% annualized return compared to IXUS’s 3.90% annualized return.

Dividend Yield Comparison

When it comes to dividend yield, IEFA has a slightly higher yield than IXUS. As of December 9, 2023, IEFA has a dividend yield of 2.13% compared to IXUS’s yield of 2.03%. It’s worth noting that both funds have relatively low dividend yields compared to other international equity funds.

In summary, while IEFA has provided higher returns than IXUS over the past 5 and 10 years, IXUS has outperformed IEFA in the past year. Additionally, IEFA has a slightly higher dividend yield than IXUS. Ultimately, the decision between IEFA and IXUS comes down to your investment goals and risk tolerance.

Risk and Volatility

When comparing IEFA and IXUS, assessing risk and volatility is crucial to making an informed decision. This section will explore risk-adjusted performance metrics and volatility comparison between the two ETFs.

Risk-Adjusted Performance Metrics

The Sharpe ratio is a popular measure of risk-adjusted performance that takes into account an investment’s return and its volatility. According to PortfoliosLab, both IEFA and IXUS have similar Sharpe ratios, indicating that they have similar levels of risk-adjusted performance. However, it’s essential to note that past performance is not indicative of future results.

Another essential metric to consider when assessing risk-adjusted performance is alpha. Alpha measures the excess return of an investment compared to its benchmark. According to MoneyMainst, IEFA has a slightly higher alpha than IXUS, indicating that it has outperformed its benchmark by a small margin.

Volatility Comparison

Volatility measures the price fluctuations of an investment over time. According to PortfoliosLab, both IEFA and IXUS have similar volatilities, with their rolling one-month volatility being almost the same. However, it’s essential to note that volatility can fluctuate over time, and past volatility is not indicative of future results.

Another important metric to consider when assessing volatility is drawdown. Drawdown measures the peak-to-trough decline of an investment. According to Seeking Alpha, both IEFA and IXUS have similar drawdowns, indicating that they have similar levels of risk.

In summary, when comparing IEFA and IXUS, both ETFs have similar levels of risk-adjusted performance and volatility. However, it’s essential to note that past performance is not indicative of future results, and investors should conduct their research before making any investment decisions.

Costs and Expenses

When it comes to investing, costs and expenses are an important consideration. In this section, we’ll take a closer look at the costs and expenses associated with IEFA and IXUS.

Expense Ratio Comparison

One of the most important costs to consider when comparing ETFs is the expense ratio. This is the annual fee that the fund charges to cover its operating expenses. The expense ratio is expressed as a percentage of the fund’s assets under management (AUM).

According to ETF.com, IEFA has a lower expense ratio than IXUS, with an expense ratio of 0.07% compared to IXUS’s expense ratio of 0.09%. This means that for every $10,000 you invest in IEFA, you’ll pay $7 in fees each year, while for IXUS, you’ll pay $9 in fees.

Management Fees

In addition to the expense ratio, it’s important to consider the management fees associated with each ETF. These fees are paid to the fund’s management team for their services in managing the fund.

According to MoneyMainst.com, IEFA has a management fee of 0.00%, while IXUS also has a management fee of 0.07%. This means that for every $10,000 you invest in IEFA, you won’t pay any management fees, while for IXUS, you’ll pay $7 in management fees.

Overall, when it comes to costs and expenses, IEFA appears to be the more cost-effective option, with a lower expense ratio and no management fees. However, it’s important to consider other factors such as performance and holdings when making an investment decision.

Fund Holdings and Diversification

When comparing IEFA vs IXUS, it’s important to consider the funds’ holdings and diversification. Here’s a breakdown of each:

Equity Market Coverage

IEFA and IXUS both provide exposure to developed and emerging markets outside of the United States. IEFA tracks the MSCI EAFE Index, which includes companies from Europe, Australasia, and the Far East. IXUS tracks the MSCI ACWI ex USA Index, which includes companies from both developed and emerging markets.

Diversified Market Capitalization

IEFA and IXUS both offer exposure to companies of varying sizes. IEFA includes mid- and large-cap companies, while IXUS includes small-, mid-, and large-cap companies. This means that IXUS may offer more diversification in terms of market capitalization.

When it comes to holdings, IEFA has over 3,000 holdings, while IXUS has over 6,000 holdings. This means that IXUS may offer more diversification in terms of the number of holdings.

In terms of sectors, both funds are well-diversified. IEFA’s top three sectors are financials, industrials, and consumer discretionary, while IXUS’s top three sectors are information technology, financials, and healthcare.

Overall, both IEFA and IXUS offer diversified exposure to international equity markets. When choosing between the two, consider factors such as market capitalization and number of holdings.

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