The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VHT is a Vanguard Health fund. So, what’s the difference between IEFA and VHT? And which fund is better?
The expense ratio of IEFA is 0.03 percentage points lower than VHT’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 VHT over the past ten years.
In this article, we’ll compare IEFA vs. VHT. We’ll look at fund composition and performance, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss IEFA’s and VHT’s annual returns, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Vanguard Health Care Index Fund ETF Shares|
|Category||Foreign Large Blend||Health|
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
IEFA’s dividend yield is 1.13% higher than that of VHT (2.28% vs. 1.15%). Also, IEFA yielded on average 10.25% less per year over the past decade (5.79% vs. 16.04%). The expense ratio of IEFA is 0.03 percentage points lower than VHT’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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
IEFA is 16.27% more exposed to the Industrials sector than VHT (16.32% vs 0.05%). IEFA’s exposure to Financial Services and Healthcare stocks is 15.89% higher and 87.56% lower respectively (15.91% vs. 0.02% and 12.01% vs. 99.57%). In total, Utilities, Real Estate, and Communication Services also make up 13.09% more of the fund’s holdings compared to VHT (13.09% vs. 0.00%).
|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%.
|Johnson & Johnson||7.34%|
|UnitedHealth Group Inc||6.44%|
|Thermo Fisher Scientific Inc||3.37%|
|Merck & Co Inc||3.33%|
|Eli Lilly and Co||3.17%|
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
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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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% 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 VHT, the end total would have been $24,392. This equates to a $14,392 profit over 7 years and a compound annual growth rate (CAGR) of 16.04%.
IEFA’s CAGR is 10.25 percentage points lower than that of VHT and as a result, would have yielded $10,384 less on a $10,000 investment. Thus, IEFA performed worse than VHT by 10.25% annually.
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