The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Growth Index Fund ETF Shares (VUG) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VUG is a Vanguard Large Growth fund. So, what’s the difference between IEFA and VUG? And which fund is better?
The expense ratio of IEFA is 0.03 percentage points higher than VUG’s (0.07% vs. 0.04%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VUG over the past ten years.
In this article, we’ll compare IEFA vs. VUG. We’ll look at industry exposure and annual returns, as well as at their holdings and risk metrics. Moreover, I’ll also discuss IEFA’s and VUG’s performance, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Vanguard Growth Index Fund ETF Shares|
|Category||Foreign Large Blend||Large Growth|
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 Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
IEFA’s dividend yield is 1.71% higher than that of VUG (2.28% vs. 0.57%). Also, IEFA yielded on average 11.79% less per year over the past decade (5.79% vs. 17.58%). The expense ratio of IEFA is 0.03 percentage points higher than VUG’s (0.07% vs. 0.04%).
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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 Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.
VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.
IEFA is 11.19% more exposed to the Industrials sector than VUG (16.32% vs 5.13%). IEFA’s exposure to Financial Services and Healthcare stocks is 9.16% higher and 3.92% higher respectively (15.91% vs. 6.75% and 12.01% vs. 8.09%). In total, Utilities, Real Estate, and Communication Services also make up 5.86% less of the fund’s holdings compared to VUG (13.09% vs. 18.95%).
|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%.
|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
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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 2020 was the strongest year for VUG, returning 40.16% on an annual basis. The poorest year for VUG in the last ten years was 2018, with a yield of -3.32%. Most years the Vanguard Growth Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.62%, 17.03%, and 17.11% 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 VUG, the end total would have been $29,615. This equates to a $19,615 profit over 7 years and a compound annual growth rate (CAGR) of 17.58%.
IEFA’s CAGR is 11.79 percentage points lower than that of VUG and as a result, would have yielded $15,607 less on a $10,000 investment. Thus, IEFA performed worse than VUG by 11.79% annually.
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