The iShares Core MSCI EAFE ETF (IEFA) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between IEFA and XLV? And which fund is better?
The expense ratio of IEFA is 0.05 percentage points lower than XLV’s (0.07% vs. 0.12%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than XLV over the past ten years.
In this article, we’ll compare IEFA vs. XLV. We’ll look at portfolio growth and annual returns, as well as at their fund composition and holdings. Moreover, I’ll also discuss IEFA’s and XLV’s industry exposure, risk metrics, and performance and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||Health Care Select Sector SPDR Fund|
|Category||Foreign Large Blend||Health|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
IEFA’s dividend yield is 0.88% higher than that of XLV (2.28% vs. 1.4%). Also, IEFA yielded on average 9.24% less per year over the past decade (5.79% vs. 15.02%). The expense ratio of IEFA is 0.05 percentage points lower than XLV’s (0.07% vs. 0.12%).
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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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
IEFA is 16.32% more exposed to the Industrials sector than XLV (16.32% vs 0.0%). IEFA’s exposure to Financial Services and Healthcare stocks is 15.91% higher and 87.99% lower respectively (15.91% vs. 0.0% and 12.01% vs. 100.0%). In total, Utilities, Real Estate, and Communication Services also make up 13.09% more of the fund’s holdings compared to XLV (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||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
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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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% 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 XLV, the end total would have been $22,977. This equates to a $12,977 profit over 7 years and a compound annual growth rate (CAGR) of 15.02%.
IEFA’s CAGR is 9.24 percentage points lower than that of XLV and as a result, would have yielded $8,969 less on a $10,000 investment. Thus, IEFA performed worse than XLV by 9.24% annually.
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