VIG vs. EFA: What’s The Difference?

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between VIG and EFA? And which fund is better?

The expense ratio of VIG is 0.26 percentage points lower than EFA’s (0.06% vs. 0.32%). VIG also has a higher exposure to the industrials sector and a lower standard deviation. Overall, VIG has provided higher returns than EFA over the past ten years.

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

Summary

VIG EFA
Name Vanguard Dividend Appreciation Index Fund ETF Shares iShares MSCI EAFE ETF
Category Large Blend Foreign Large Blend
Issuer Vanguard iShares
AUM 71.92B 56.77B
Avg. Return 13.35% 6.47%
Div. Yield 1.56% 2.28%
Expense Ratio 0.06% 0.32%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.

The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.

VIG’s dividend yield is 0.72% lower than that of EFA (1.56% vs. 2.28%). Also, VIG yielded on average 6.88% more per year over the past decade (13.35% vs. 6.47%). The expense ratio of VIG is 0.26 percentage points lower than EFA’s (0.06% vs. 0.32%).

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Fund Composition

Industry Exposure

VIG vs. EFA - Industry Exposure

VIG EFA
Technology 14.93% 9.68%
Industrials 17.23% 15.01%
Energy 0.0% 3.51%
Communication Services 2.86% 5.68%
Utilities 2.81% 3.35%
Healthcare 15.52% 12.8%
Consumer Defensive 15.32% 10.56%
Real Estate 0.0% 3.01%
Financial Services 17.18% 16.88%
Consumer Cyclical 10.47% 11.62%
Basic Materials 3.67% 7.91%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.

VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.

The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.

EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.

VIG is 2.22% more exposed to the Industrials sector than EFA (17.23% vs 15.01%). VIG’s exposure to Financial Services and Healthcare stocks is 0.30% higher and 2.72% higher respectively (17.18% vs. 16.88% and 15.52% vs. 12.8%). In total, Energy, Utilities, and Communication Services also make up 6.87% less of the fund’s holdings compared to EFA (5.67% vs. 12.54%).

Holdings

VIG - Holdings

VIG Holdings Weight
Microsoft Corp 4.19%
JPMorgan Chase & Co 3.8%
Johnson & Johnson 3.67%
Walmart Inc 3.38%
Visa Inc Class A 3.22%
UnitedHealth Group Inc 3.22%
The Home Depot Inc 2.91%
Procter & Gamble Co 2.82%
Comcast Corp Class A 2.21%
Coca-Cola Co 1.98%

VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.

UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.

EFA - Holdings

EFA Holdings Weight
Nestle SA 2.11%
ASML Holding NV 1.69%
Roche Holding AG 1.55%
LVMH Moet Hennessy Louis Vuitton SE 1.28%
Novartis AG 1.19%
Toyota Motor Corp 1.09%
AstraZeneca PLC 0.92%
Unilever PLC 0.9%
AIA Group Ltd 0.88%
SAP SE 0.86%

EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.

Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.

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Risk Analysis

VIG EFA
Mean Return 1.09 0.57
R-squared 92.2 96.78
Std. Deviation 12.25 15.01
Alpha 0.12 0.47
Beta 0.86 0.98
Sharpe Ratio 1.01 0.41
Treynor Ratio 14.33 5.33

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Alpha of 0.12 with a Standard Deviation of 12.25 and a Mean Return of 1.09. Its R-squared is 92.2 while VIG’s Sharpe Ratio is 1.01. Furthermore, the fund has a Beta of 0.86 and a Treynor Ratio of 14.33.

The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Treynor Ratio of 5.33 and a R-squared of 96.78. Its Alpha is 0.47 while EFA’s Sharpe Ratio is 0.41. Furthermore, the fund has a Standard Deviation of 15.01 and a Beta of 0.98.

VIG’s Mean Return is 0.52 points higher than that of EFA and its R-squared is 4.58 points lower. With a Standard Deviation of 12.25, VIG is slightly less volatile than EFA. The Alpha and Beta of VIG are 0.35 points lower and 0.12 points lower than EFA’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. EFA - Annual Returns

Year VIG EFA
2020 15.46% 7.92%
2019 29.71% 21.94%
2018 -2.02% -13.83%
2017 22.22% 24.94%
2016 11.84% 0.96%
2015 -1.95% -0.9%
2014 10.06% -5.04%
2013 28.99% 22.62%
2012 11.61% 17.22%
2011 6.21% -12.18%
2010 14.67% 7.52%

VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% respectively.

The year 2017 was the strongest year for EFA, returning 24.94% on an annual basis. The poorest year for EFA in the last ten years was 2018, with a yield of -13.83%. Most years the iShares MSCI EAFE ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 0.96%, 7.52%, and 7.92% respectively.

Portfolio Growth

VIG vs. EFA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $37,951 13.35%
EFA $10,000 $18,269 6.47%

A $10,000 investment in VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.

With a $10,000 investment in EFA, the end total would have been $18,269. This equates to a $8,269 profit over 11 years and a compound annual growth rate (CAGR) of 6.47%.

VIG’s CAGR is 6.88 percentage points higher than that of EFA and as a result, would have yielded $19,682 more on a $10,000 investment. Thus, VIG outperformed EFA by 6.88% annually.


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