The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Information Technology Index Fund ETF Shares (VGT) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VGT is a Vanguard Technology fund. So, what’s the difference between IEFA and VGT? And which fund is better?
The expense ratio of IEFA is 0.03 percentage points lower than VGT’s (0.07% vs. 0.1%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VGT over the past ten years.
In this article, we’ll compare IEFA vs. VGT. We’ll look at performance and risk metrics, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss IEFA’s and VGT’s holdings, annual returns, and fund composition and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Vanguard Information Technology Index Fund ETF Shares|
|Category||Foreign Large Blend||Technology|
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 Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
IEFA’s dividend yield is 1.62% higher than that of VGT (2.28% vs. 0.66%). Also, IEFA yielded on average 15.05% less per year over the past decade (5.79% vs. 20.84%). The expense ratio of IEFA is 0.03 percentage points lower than VGT’s (0.07% vs. 0.1%).
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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 Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.
IEFA is 14.65% more exposed to the Industrials sector than VGT (16.32% vs 1.67%). IEFA’s exposure to Financial Services and Healthcare stocks is 7.08% higher and 12.01% higher respectively (15.91% vs. 8.83% and 12.01% vs. 0.0%). In total, Utilities, Real Estate, and Communication Services also make up 12.48% more of the fund’s holdings compared to VGT (13.09% vs. 0.61%).
|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%.
|Visa Inc Class A||3.16%|
|PayPal Holdings Inc||2.76%|
|Mastercard Inc Class A||2.76%|
|Cisco Systems Inc||1.9%|
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
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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 VGT, returning 48.68% on an annual basis. The poorest year for VGT in the last ten years was 2011, with a yield of 0.52%. Most years the Vanguard Information Technology Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 13.73%, 14.05%, and 18.01% 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 VGT, the end total would have been $42,977. This equates to a $32,977 profit over 7 years and a compound annual growth rate (CAGR) of 20.84%.
IEFA’s CAGR is 15.05 percentage points lower than that of VGT and as a result, would have yielded $28,969 less on a $10,000 investment. Thus, IEFA performed worse than VGT by 15.05% annually.
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