The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares Core MSCI EAFE ETF (IEFA) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and IEFA is a iShares Foreign Large Blend fund. So, what’s the difference between VEA and IEFA? And which fund is better?
The expense ratio of VEA is 0.02 percentage points lower than IEFA’s (0.05% vs. 0.07%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided higher returns than IEFA over the past ten years.
In this article, we’ll compare VEA vs. IEFA. We’ll look at performance and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss VEA’s and IEFA’s risk metrics, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares Core MSCI EAFE ETF|
|Category||Foreign Large Blend||Foreign Large Blend|
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 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%.
VEA’s dividend yield is 0.21% higher than that of IEFA (2.49% vs. 2.28%). Also, VEA yielded on average 1.26% more per year over the past decade (7.05% vs. 5.79%). The expense ratio of VEA is 0.02 percentage points lower than IEFA’s (0.05% vs. 0.07%).
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The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.
VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.
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%.
VEA is 1.48% more exposed to the Financial Services sector than IEFA (17.39% vs 15.91%). VEA’s exposure to Industrials and Technology stocks is 0.85% lower and 1.86% higher respectively (15.47% vs. 16.32% and 11.67% vs. 9.81%). In total, Real Estate, Energy, and Communication Services also make up 0.59% more of the fund’s holdings compared to IEFA (13.62% vs. 13.03%).
|Samsung Electronics Co Ltd||1.4%|
|ASML Holding NV||1.16%|
|Roche Holding AG||1.1%|
|Toyota Motor Corp||0.92%|
|LVMH Moet Hennessy Louis Vuitton SE||0.84%|
|Shopify Inc A||0.7%|
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
|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%.
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VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% respectively.
The year 2017 was the strongest year for IEFA, returning 26.42% on an annual basis. The poorest year for IEFA in the last ten years was 2018, with a yield of -14.2%. Most years the iShares Core MSCI EAFE ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 0.53%, and 1.36% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $14,044. This is a profit of $4,044 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in IEFA, the end total would have been $14,008. This equates to a $4,008 profit over 7 years and a compound annual growth rate (CAGR) of 5.79%.
VEA’s CAGR is 1.26 percentage points higher than that of IEFA and as a result, would have yielded $36 more on a $10,000 investment. Thus, VEA outperformed IEFA by 1.26% annually.
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