The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between VTI and EFA? And which fund is better?
The expense ratio of VTI is 0.29 percentage points lower than EFA’s (0.03% vs. 0.32%). VTI also has a higher exposure to the technology sector and a lower standard deviation. Overall, VTI has provided higher returns than EFA over the past ten years.
In this article, we’ll compare VTI vs. EFA. We’ll look at performance and annual returns, as well as at their holdings and industry exposure. Moreover, I’ll also discuss VTI’s and EFA’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
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|Name||Vanguard Total Stock Market Index Fund ETF Shares||iShares MSCI EAFE ETF|
|Category||Large Blend||Foreign Large Blend|
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.03%.
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%.
VTI’s dividend yield is 1.02% lower than that of EFA (1.26% vs. 2.28%). Also, VTI yielded on average 8.23% more per year over the past decade (14.70% vs. 6.47%). The expense ratio of VTI is 0.29 percentage points lower than EFA’s (0.03% vs. 0.32%).
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The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has the most exposure to the Technology sector at 24.1%. This is followed by Financial Services and Healthcare at 13.77% and 13.64% respectively. Basic Materials (2.44%), Energy (2.77%), and Real Estate (3.59%) only make up 8.80% of the fund’s total assets.
VTI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.77%, 9.39%, 10.4%, 11.83%, and 13.64%.
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%.
VTI is 14.42% more exposed to the Technology sector than EFA (24.1% vs 9.68%). VTI’s exposure to Financial Services and Healthcare stocks is 3.11% lower and 0.84% higher respectively (13.77% vs. 16.88% and 13.64% vs. 12.8%). In total, Basic Materials, Energy, and Real Estate also make up 5.63% less of the fund’s holdings compared to EFA (8.80% vs. 14.43%).
|Facebook Inc Class A||1.88%|
|Alphabet Inc Class A||1.66%|
|Alphabet Inc Class C||1.56%|
|Berkshire Hathaway Inc Class B||1.09%|
|JPMorgan Chase & Co||1.06%|
VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.
|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
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%.
VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
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%.
VTI’s CAGR is 8.23 percentage points higher than that of EFA and as a result, would have yielded $24,379 more on a $10,000 investment. Thus, VTI outperformed EFA by 8.23% annually.
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