IEFA vs. VT: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Total World Stock Index Fund ETF Shares (VT) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VT is a Vanguard N/A fund. So, what’s the difference between IEFA and VT? And which fund is better?

The expense ratio of IEFA is 0.01 percentage points lower than VT’s (0.07% vs. 0.08%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VT over the past ten years.

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

Summary

IEFA VT
Name iShares Core MSCI EAFE ETF Vanguard Total World Stock Index Fund ETF Shares
Category Foreign Large Blend N/A
Issuer iShares Vanguard
AUM 95.78B 30.44B
Avg. Return 5.79% 10.42%
Div. Yield 2.28% 1.65%
Expense Ratio 0.07% 0.08%

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 Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.

IEFA’s dividend yield is 0.63% higher than that of VT (2.28% vs. 1.65%). Also, IEFA yielded on average 4.63% less per year over the past decade (5.79% vs. 10.42%). The expense ratio of IEFA is 0.01 percentage points lower than VT’s (0.07% vs. 0.08%).

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Fund Composition

Industry Exposure

IEFA vs. VT - Industry Exposure

IEFA VT
Technology 9.81% 19.63%
Industrials 16.32% 10.7%
Energy 3.19% 3.48%
Communication Services 5.53% 9.02%
Utilities 3.25% 2.6%
Healthcare 12.01% 11.58%
Consumer Defensive 9.78% 6.71%
Real Estate 4.31% 3.64%
Financial Services 15.91% 15.36%
Consumer Cyclical 11.96% 12.32%
Basic Materials 7.93% 4.97%

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 Total World Stock Index Fund ETF Shares (VT) has the most exposure to the Technology sector at 19.63%. This is followed by Financial Services and Consumer Cyclical at 15.36% and 12.32% respectively. Energy (3.48%), Real Estate (3.64%), and Basic Materials (4.97%) only make up 12.09% of the fund’s total assets.

VT’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Industrials, Healthcare, and Consumer Cyclical stocks at 6.71%, 9.02%, 10.7%, 11.58%, and 12.32%.

IEFA is 5.62% more exposed to the Industrials sector than VT (16.32% vs 10.7%). IEFA’s exposure to Financial Services and Healthcare stocks is 0.55% higher and 0.43% higher respectively (15.91% vs. 15.36% and 12.01% vs. 11.58%). In total, Utilities, Real Estate, and Communication Services also make up 2.17% less of the fund’s holdings compared to VT (13.09% vs. 15.26%).

Holdings

IEFA - Holdings

IEFA Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

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%.

VT - Holdings

VT Holdings Weight
Apple Inc 2.85%
Microsoft Corp 2.71%
Amazon.com Inc 1.98%
Facebook Inc Class A 1.1%
Alphabet Inc Class A 0.97%
Alphabet Inc Class C 0.95%
Tesla Inc 0.7%
NVIDIA Corp 0.64%
JPMorgan Chase & Co 0.62%
Tencent Holdings Ltd 0.6%

VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.

Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.

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Performance

Annual Returns

IEFA vs. VT - Annual Returns

Year IEFA VT
2020 8.55% 16.74%
2019 22.67% 26.8%
2018 -14.2% -9.67%
2017 26.42% 24.19%
2016 1.36% 8.77%
2015 0.53% -1.88%
2014 -4.82% 3.97%
2013 23.73% 22.98%
2012 0.0% 17.33%
2011 0.0% -7.71%
2010 0.0% 13.05%

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 VT, returning 26.8% on an annual basis. The poorest year for VT in the last ten years was 2018, with a yield of -9.67%. Most years the Vanguard Total World Stock Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 8.77%, 13.05%, and 16.74% respectively.

Portfolio Growth

IEFA vs. VT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
VT $10,000 $18,426 10.42%

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 VT, the end total would have been $18,426. This equates to a $8,426 profit over 7 years and a compound annual growth rate (CAGR) of 10.42%.

IEFA’s CAGR is 4.63 percentage points lower than that of VT and as a result, would have yielded $4,418 less on a $10,000 investment. Thus, IEFA performed worse than VT by 4.63% annually.


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