IEFA vs. VTIP: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between IEFA and VTIP? And which fund is better?

The expense ratio of IEFA is 0.02 percentage points higher than VTIP’s (0.07% vs. 0.05%). IEFA also has a high exposure to the industrials sector while VTIP is mostly comprised of AAA bonds. Overall, IEFA has provided higher returns than VTIP over the past ten years.

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

Summary

IEFA VTIP
Name iShares Core MSCI EAFE ETF Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Foreign Large Blend Inflation-Protected Bond
Issuer iShares Vanguard
AUM 95.78B 50.67B
Avg. Return 5.79% 1.79%
Div. Yield 2.28% 1.35%
Expense Ratio 0.07% 0.05%

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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

IEFA’s dividend yield is 0.93% higher than that of VTIP (2.28% vs. 1.35%). Also, IEFA yielded on average 3.99% more per year over the past decade (5.79% vs. 1.79%). The expense ratio of IEFA is 0.02 percentage points higher than VTIP’s (0.07% vs. 0.05%).

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Fund Composition

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%.

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Performance

Annual Returns

IEFA vs. VTIP - Annual Returns

Year IEFA VTIP
2020 8.55% 4.97%
2019 22.67% 4.83%
2018 -14.2% 0.54%
2017 26.42% 0.82%
2016 1.36% 2.71%
2015 0.53% -0.15%
2014 -4.82% -1.17%
2013 23.73% -1.55%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

IEFA vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
VTIP $10,000 $11,305 1.79%

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 VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

IEFA’s CAGR is 3.99 percentage points higher than that of VTIP and as a result, would have yielded $2,703 more on a $10,000 investment. Thus, IEFA outperformed VTIP by 3.99% annually.


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