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IEFA vs. VIG: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VIG is a Vanguard Large Blend fund. So, what’s the difference between IEFA and VIG? And which fund is better?

The expense ratio of IEFA is 0.01 percentage points higher than VIG’s (0.07% vs. 0.06%). IEFA also has a lower exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VIG over the past ten years.

In this article, we’ll compare IEFA vs. VIG. We’ll look at fund composition and risk metrics, as well as at their holdings and annual returns. Moreover, I’ll also discuss IEFA’s and VIG’s portfolio growth, performance, and industry exposure and examine how these affect their overall returns.

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Summary

IEFAVIG
NameiShares Core MSCI EAFE ETFVanguard Dividend Appreciation Index Fund ETF Shares
CategoryForeign Large BlendLarge Blend
IssueriSharesVanguard
AUM95.78B71.92B
Avg. Return5.79%13.35%
Div. Yield2.28%1.56%
Expense Ratio0.07%0.06%

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 Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.

IEFA’s dividend yield is 0.72% higher than that of VIG (2.28% vs. 1.56%). Also, IEFA yielded on average 7.56% less per year over the past decade (5.79% vs. 13.35%). The expense ratio of IEFA is 0.01 percentage points higher than VIG’s (0.07% vs. 0.06%).

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Fund Composition

Industry Exposure

IEFA vs. VIG - Industry Exposure

IEFAVIG
Technology9.81%14.93%
Industrials16.32%17.23%
Energy3.19%0.0%
Communication Services5.53%2.86%
Utilities3.25%2.81%
Healthcare12.01%15.52%
Consumer Defensive9.78%15.32%
Real Estate4.31%0.0%
Financial Services15.91%17.18%
Consumer Cyclical11.96%10.47%
Basic Materials7.93%3.67%

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 Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.

VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.

IEFA is 0.91% less exposed to the Industrials sector than VIG (16.32% vs 17.23%). IEFA’s exposure to Financial Services and Healthcare stocks is 1.27% lower and 3.51% lower respectively (15.91% vs. 17.18% and 12.01% vs. 15.52%). In total, Utilities, Real Estate, and Communication Services also make up 7.42% more of the fund’s holdings compared to VIG (13.09% vs. 5.67%).

Holdings

IEFA - Holdings

IEFA HoldingsWeight
Nestle SA1.77%
ASML Holding NV1.43%
Roche Holding AG1.31%
LVMH Moet Hennessy Louis Vuitton SE1.08%
Novartis AG1.0%
Toyota Motor Corp0.92%
AstraZeneca PLC0.78%
Unilever PLC0.76%
AIA Group Ltd0.74%
SAP SE0.73%

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%.

VIG - Holdings

VIG HoldingsWeight
Microsoft Corp4.19%
JPMorgan Chase & Co3.8%
Johnson & Johnson3.67%
Walmart Inc3.38%
Visa Inc Class A3.22%
UnitedHealth Group Inc3.22%
The Home Depot Inc2.91%
Procter & Gamble Co2.82%
Comcast Corp Class A2.21%
Coca-Cola Co1.98%

VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.

UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.

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Performance

Annual Returns

IEFA vs. VIG - Annual Returns

YearIEFAVIG
20208.55%15.46%
201922.67%29.71%
2018-14.2%-2.02%
201726.42%22.22%
20161.36%11.84%
20150.53%-1.95%
2014-4.82%10.06%
201323.73%28.99%
20120.0%11.61%
20110.0%6.21%
20100.0%14.67%

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 VIG, returning 29.71% on an annual basis. The poorest year for VIG in the last ten years was 2018, with a yield of -2.02%. Most years the Vanguard Dividend Appreciation Index Fund ETF Shares has given investors modest returns, such as in 2012, 2016, and 2010, when gains were 11.61%, 11.84%, and 14.67% respectively.

Portfolio Growth

IEFA vs. VIG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEFA$10,000$14,0085.79%
VIG$10,000$21,64513.35%

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 VIG, the end total would have been $21,645. This equates to a $11,645 profit over 7 years and a compound annual growth rate (CAGR) of 13.35%.

IEFA’s CAGR is 7.56 percentage points lower than that of VIG and as a result, would have yielded $7,637 less on a $10,000 investment. Thus, IEFA performed worse than VIG by 7.56% annually.


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