The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between IEFA and VCIT? And which fund is better?
The expense ratio of IEFA is 0.02 percentage points higher than VCIT’s (0.07% vs. 0.05%). IEFA also has a high exposure to the industrials sector while VCIT is mostly comprised of BBB bonds. Overall, IEFA has provided lower returns than VCIT over the past ten years.
In this article, we’ll compare IEFA vs. VCIT. We’ll look at annual returns and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss IEFA’s and VCIT’s portfolio growth, performance, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Foreign Large Blend||Corporate Bond|
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 Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
IEFA’s dividend yield is 0.05% lower than that of VCIT (2.28% vs. 2.33%). Also, IEFA yielded on average 0.05% less per year over the past decade (5.79% vs. 5.84%). The expense ratio of IEFA is 0.02 percentage points higher than VCIT’s (0.07% vs. 0.05%).
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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%.
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (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 2019 was the strongest year for VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% 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 VCIT, the end total would have been $14,774. This equates to a $4,774 profit over 7 years and a compound annual growth rate (CAGR) of 5.84%.
IEFA’s CAGR is 0.05 percentage points lower than that of VCIT and as a result, would have yielded $766 less on a $10,000 investment. Thus, IEFA performed worse than VCIT by 0.05% annually.
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