The Vanguard S&P 500 ETF (VOO) and the iShares Core MSCI EAFE ETF (IEFA) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and IEFA is a iShares Foreign Large Blend fund. So, what’s the difference between VOO and IEFA? And which fund is better?
The expense ratio of VOO is 0.04 percentage points lower than IEFA’s (0.03% vs. 0.07%). VOO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VOO has provided higher returns than IEFA over the past ten years.
In this article, we’ll compare VOO vs. IEFA. We’ll look at industry exposure and holdings, as well as at their annual returns and performance. Moreover, I’ll also discuss VOO’s and IEFA’s portfolio growth, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||Vanguard S&P 500 ETF||iShares Core MSCI EAFE ETF|
|Category||Large Blend||Foreign Large Blend|
The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.
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%.
VOO’s dividend yield is 0.94% lower than that of IEFA (1.34% vs. 2.28%). Also, VOO yielded on average 8.66% more per year over the past decade (14.45% vs. 5.79%). The expense ratio of VOO is 0.04 percentage points lower than IEFA’s (0.03% vs. 0.07%).
The Vanguard S&P 500 ETF (VOO) has the most exposure to the Technology sector at 24.24%. This is followed by Financial Services and Healthcare at 14.2% and 13.1% respectively. Utilities (2.43%), Real Estate (2.58%), and Energy (2.84%) only make up 7.85% of the fund’s total assets.
VOO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 6.32%, 8.86%, 11.14%, 12.01%, and 13.1%.
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%.
VOO is 14.43% more exposed to the Technology sector than IEFA (24.24% vs 9.81%). VOO’s exposure to Financial Services and Healthcare stocks is 1.71% lower and 1.09% higher respectively (14.2% vs. 15.91% and 13.1% vs. 12.01%). In total, Utilities, Real Estate, and Energy also make up 2.90% less of the fund’s holdings compared to IEFA (7.85% vs. 10.75%).
|Facebook Inc Class A||2.29%|
|Alphabet Inc Class A||2.02%|
|Alphabet Inc Class C||1.97%|
|Berkshire Hathaway Inc Class B||1.44%|
|JPMorgan Chase & Co||1.3%|
VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.
|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%.
VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% 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 VOO would have resulted in a final balance of $23,343. This is a profit of $13,343 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.45%.
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%.
VOO’s CAGR is 8.66 percentage points higher than that of IEFA and as a result, would have yielded $9,335 more on a $10,000 investment. Thus, VOO outperformed IEFA by 8.66% annually.
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