The iShares Core MSCI EAFE ETF (IEFA) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between IEFA and TLT? And which fund is better?
The expense ratio of IEFA is 0.08 percentage points lower than TLT’s (0.07% vs. 0.15%). IEFA also has a high exposure to the industrials sector while TLT is mostly comprised of AAA bonds. Overall, IEFA has provided lower returns than TLT over the past ten years.
In this article, we’ll compare IEFA vs. TLT. We’ll look at holdings and risk metrics, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss IEFA’s and TLT’s annual returns, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||iShares 20+ Year Treasury Bond ETF|
|Category||Foreign Large Blend||Long Government|
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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
IEFA’s dividend yield is 0.78% higher than that of TLT (2.28% vs. 1.5%). Also, IEFA yielded on average 3.21% less per year over the past decade (5.79% vs. 9.00%). The expense ratio of IEFA is 0.08 percentage points lower than TLT’s (0.07% vs. 0.15%).
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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%.
|TLT Bond Sectors||Weight|
TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% 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 TLT, the end total would have been $18,352. This equates to a $8,352 profit over 7 years and a compound annual growth rate (CAGR) of 9.00%.
IEFA’s CAGR is 3.21 percentage points lower than that of TLT and as a result, would have yielded $4,344 less on a $10,000 investment. Thus, IEFA performed worse than TLT by 3.21% annually.
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