The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Small-Cap Index Fund ETF Shares (VB) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VB is a Vanguard Small Blend fund. So, what’s the difference between IEFA and VB? And which fund is better?
The expense ratio of IEFA is 0.02 percentage points higher than VB’s (0.07% vs. 0.05%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VB over the past ten years.
In this article, we’ll compare IEFA vs. VB. We’ll look at portfolio growth and fund composition, as well as at their industry exposure and performance. Moreover, I’ll also discuss IEFA’s and VB’s annual returns, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Vanguard Small-Cap Index Fund ETF Shares|
|Category||Foreign Large Blend||Small Blend|
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 Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
IEFA’s dividend yield is 1.14% higher than that of VB (2.28% vs. 1.14%). Also, IEFA yielded on average 8.47% less per year over the past decade (5.79% vs. 14.25%). The expense ratio of IEFA is 0.02 percentage points higher than VB’s (0.07% vs. 0.05%).
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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 Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.
VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.
IEFA is 0.21% more exposed to the Industrials sector than VB (16.32% vs 16.11%). IEFA’s exposure to Financial Services and Healthcare stocks is 2.85% higher and 2.33% lower respectively (15.91% vs. 13.06% and 12.01% vs. 14.34%). In total, Utilities, Real Estate, and Communication Services also make up 1.06% less of the fund’s holdings compared to VB (13.09% vs. 14.15%).
|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%.
|Charles River Laboratories International Inc||0.34%|
|Diamondback Energy Inc||0.31%|
|VICI Properties Inc Ordinary Shares||0.3%|
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
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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 2013 was the strongest year for VB, returning 37.8% on an annual basis. The poorest year for VB in the last ten years was 2018, with a yield of -9.3%. Most years the Vanguard Small-Cap Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2016, when gains were 16.24%, 18.22%, and 18.31% 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 VB, the end total would have been $19,597. This equates to a $9,597 profit over 7 years and a compound annual growth rate (CAGR) of 14.25%.
IEFA’s CAGR is 8.47 percentage points lower than that of VB and as a result, would have yielded $5,589 less on a $10,000 investment. Thus, IEFA performed worse than VB by 8.47% annually.
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