If you’re looking to invest in international equities, you may be considering Vanguard’s VEA and iShares’ IEFA.
VEA vs IEFA: Both ETFs offer exposure to developed markets outside of the United States, but there are some key differences between the two funds that may impact your investment decision.
VEA and IEFA both track indexes that include large-, mid-, and small-cap stocks from developed countries. VEA tracks the FTSE Developed All Cap ex US Index, while IEFA tracks the MSCI EAFE Investable Market Index. One key difference between the two indexes is that the FTSE index includes Canada, while the MSCI index does not. However, the difference in country exposure is relatively small, with Canada accounting for less than 10% of VEA’s holdings.
Another difference between VEA and IEFA is their expense ratios. As of December 2023, VEA has an expense ratio of 0.05%, while IEFA’s expense ratio is slightly higher at 0.07%. While this may not seem like a significant difference, it can add up over time and impact your returns. It’s worth noting that both funds are relatively low-cost compared to other international equity ETFs.
Key Takeaways VEA vs IEFA
- VEA and IEFA both track indexes that include large-, mid-, and small-cap stocks from developed countries, but VEA includes Canada while IEFA does not.
- VEA has a slightly lower expense ratio than IEFA, but both funds are relatively low-cost compared to other international equity ETFs.
- Your investment decision between VEA and IEFA will depend on your personal investment goals and preferences, as well as your risk tolerance and overall portfolio diversification strategy.
Overview of VEA vs IEFA
If you are looking to invest in developed markets outside North America, you might have come across two popular ETFs, VEA and IEFA. VEA, or Vanguard FTSE Developed Markets ETF, is an ETF offered by Vanguard that tracks the FTSE Developed All Cap ex US Index. IEFA, or iShares Core MSCI EAFE ETF, is an ETF offered by BlackRock that tracks the MSCI EAFE Investable Market Index.
Both VEA and IEFA offer exposure to developed markets, but they have some differences. VEA has a broader geographic exposure, including Western Europe, Japan, and Australia. IEFA, on the other hand, focuses more on Europe, Australasia, and the Far East.
In terms of fees, VEA has a lower expense ratio of 0.05% compared to IEFA’s expense ratio of 0.07%. However, it’s worth noting that the difference in fees may not be significant enough to make a substantial impact on your investment returns.
When it comes to investment objectives, VEA and IEFA are both suitable for long-term investors who want exposure to developed markets. However, if you are looking for exposure to emerging markets, neither VEA nor IEFA is the right choice.
In summary, VEA and IEFA are both popular ETFs that offer exposure to developed markets. VEA has a broader geographic exposure, while IEFA focuses more on Europe, Australasia, and the Far East. Both ETFs have low fees and are suitable for long-term investors who want exposure to developed markets. However, neither VEA nor IEFA is suitable for investors who want exposure to emerging markets.
When comparing VEA and IEFA, there are several factors to consider. In this section, we will analyze the performance, expense ratio, portfolio composition and diversification, dividend yields, and returns of both ETFs.
Both VEA and IEFA offer broad diversification, with holdings in advanced economies across the globe. However, when it comes to performance, VEA has provided slightly lower returns than IEFA over the past ten years. As of the current date, VEA’s YTD return is 10.23%, 1-year return is 17.45%, 3-year return (ann) is 8.94%, 5-year return (ann) is 8.34%, and 10-year return (ann) is 6.62%. In comparison, IEFA’s YTD return is 12.31%, 1-year return is 20.12%, 3-year return (ann) is 10.49%, 5-year return (ann) is 9.76%, and 10-year return (ann) is 7.45%. It’s important to keep in mind that past performance does not guarantee future results.
Expense Ratio Comparison
VEA has a lower expense ratio of 0.05% compared to IEFA’s expense ratio of 0.07%. It’s important to note that fees and expenses can have a significant impact on your overall investment returns, so a lower expense ratio can be beneficial in the long run.
Portfolio Composition and Diversification
VEA and IEFA both hold a large number of stocks, providing broad diversification across developed markets. However, VEA’s portfolio is slightly more concentrated, with its top 10 holdings accounting for 14.48% of its assets, compared to IEFA’s top 10 holdings accounting for 11.82% of its assets. VEA’s largest holding is Nestle SA, while IEFA’s largest holding is Apple Inc.
Dividend Yields and Returns
VEA and IEFA both offer dividend yields, with VEA’s dividend yield for the trailing twelve months at around 3.06%, compared to IEFA’s 2.42% yield. When it comes to returns, VEA has provided slightly lower returns than IEFA over the past ten years, as previously mentioned.
Overall, both VEA and IEFA offer broad diversification and exposure to advanced economies across the globe. When deciding between the two, it’s important to consider factors such as performance, expense ratio, portfolio composition and diversification, and dividend yields and returns.
Risk and Volatility
Risk-Adjusted Performance Comparison
When it comes to comparing the risk-adjusted performance of VEA vs IEFA, there are a few metrics you should consider. One of the most popular metrics is the Sharpe ratio, which measures the excess return earned per unit of risk taken. According to PortfoliosLab, VEA has a higher Sharpe ratio than IEFA, indicating that it has provided better risk-adjusted returns.
Another important metric to consider is alpha, which measures the excess returns earned by a fund compared to its benchmark. According to ETF Database, VEA has a higher alpha than IEFA, indicating that it has outperformed its benchmark by a greater amount.
Volatility and Drawdown Analysis
Volatility and drawdown are two important measures of risk that investors should consider when comparing VEA vs IEFA. Volatility refers to the degree of variation of a fund’s returns over time, while drawdown refers to the peak-to-trough decline in the value of a fund during a specific period.
According to ETF.com, VEA has a slightly higher daily standard deviation than IEFA, indicating that it is slightly more volatile. However, VEA has a lower maximum drawdown than IEFA, indicating that it has experienced smaller losses during market downturns.
Overall, when it comes to risk and volatility, VEA appears to have provided better risk-adjusted returns and experienced smaller losses during market downturns compared to IEFA. However, investors should carefully consider their own risk tolerance and investment objectives before making any investment decisions.
Fundamentals of Investment Decisions
When making investment decisions, it is crucial to have a clear understanding of the fundamentals of investing. This includes understanding the risks and potential returns associated with different investment options, as well as the role that fees and expenses play in determining the overall performance of an investment.
One important factor to consider when making investment decisions is the level of liability associated with a particular investment. This refers to the degree to which an investor may be held responsible for any losses that occur as a result of their investment decisions. It is important to carefully consider the level of risk associated with any investment before making a decision, and to ensure that you have a clear understanding of the potential consequences of your investment choices.
Another key consideration when making investment decisions is the quality and reliability of the information that you have access to. This includes information about the performance and characteristics of different investments, as well as information about the fees and expenses associated with different investment options. It is important to seek out high-quality, reliable sources of information when making investment decisions, in order to ensure that you are making well-informed choices.
When considering different investment options, it is also important to evaluate the services and support that are available from different investment providers. This may include access to investment advisors or other financial professionals, as well as online tools and resources that can help you make informed decisions. It is important to carefully evaluate the level of support and services that are available from different investment providers, in order to ensure that you are able to make the best possible investment decisions for your needs.
Ultimately, when making investment decisions, it is important to carefully evaluate all of the available information and to take a balanced and informed approach. By considering the risks and potential returns associated with different investment options, as well as the fees and expenses involved, and by seeking out high-quality information and support, you can make well-informed decisions that are tailored to your specific investment goals and needs.
Issuer Information and Fund Governance
When it comes to issuer information and fund governance, there are some differences between VEA and IEFA that you should be aware of.
VEA is issued by Vanguard, while IEFA is issued by iShares. Vanguard is a well-known investment management company that has been around since 1975. It is known for its low-cost index funds and ETFs. iShares is a subsidiary of BlackRock, which is the world’s largest asset manager.
Both VEA and IEFA are passively managed ETFs that track the performance of their respective indices. VEA tracks the FTSE Developed All Cap ex US Index, while IEFA tracks the MSCI EAFE Investable Market Index.
VEA is also available as a mutual fund, the Vanguard FTSE Developed Markets Index Fund ETF. This fund has a slightly lower expense ratio than VEA.
When it comes to expenses, VEA has a slightly lower expense ratio than IEFA. VEA’s expense ratio is 0.05%, while IEFA’s expense ratio is 0.07%.
In terms of fund size, VEA has a larger AUM (assets under management) than IEFA. As of November 2023, VEA has an AUM of $1.1 trillion, while IEFA has an AUM of $680 billion.
Overall, both VEA and IEFA are reputable ETFs that are issued by well-known investment management companies. It’s important to consider the expense ratio, fund size, and other factors before deciding which ETF to invest in.
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