The Vanguard Value Index Fund ETF Shares (VTV) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. VTV is a Vanguard Large Value fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between VTV and EFA? And which fund is better?
The expense ratio of VTV is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%). VTV also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VTV has provided higher returns than EFA over the past ten years.
In this article, we’ll compare VTV vs. EFA. We’ll look at performance and risk metrics, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss VTV’s and EFA’s annual returns, holdings, and fund composition and examine how these affect their overall returns.
|Name||Vanguard Value Index Fund ETF Shares||iShares MSCI EAFE ETF|
|Category||Large Value||Foreign Large Blend|
The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.
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%.
VTV’s dividend yield is 0.13% lower than that of EFA (2.15% vs. 2.28%). Also, VTV yielded on average 5.60% more per year over the past decade (12.07% vs. 6.47%). The expense ratio of VTV is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%).
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The Vanguard Value Index Fund ETF Shares (VTV) has the most exposure to the Financial Services sector at 22.81%. This is followed by Healthcare and Industrials at 19.84% and 12.61% respectively. Real Estate (3.01%), Consumer Cyclical (3.79%), and Utilities (5.37%) only make up 12.17% of the fund’s total assets.
VTV’s mid-section with moderate exposure is comprised of Communication Services, Energy, Technology, Consumer Defensive, and Industrials stocks at 5.49%, 5.59%, 7.86%, 10.72%, and 12.61%.
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%.
VTV is 5.93% more exposed to the Financial Services sector than EFA (22.81% vs 16.88%). VTV’s exposure to Healthcare and Industrials stocks is 7.04% higher and 2.40% lower respectively (19.84% vs. 12.8% and 12.61% vs. 15.01%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 5.81% less of the fund’s holdings compared to EFA (12.17% vs. 17.98%).
|Berkshire Hathaway Inc Class B||2.98%|
|JPMorgan Chase & Co||2.82%|
|Johnson & Johnson||2.6%|
|UnitedHealth Group Inc||2.27%|
|Procter & Gamble Co||1.98%|
|Bank of America Corp||1.91%|
|Exxon Mobil Corp||1.6%|
|Comcast Corp Class A||1.57%|
|Verizon Communications Inc||1.32%|
VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.
Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.
|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%.
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The Vanguard Value Index Fund ETF Shares (VTV) has a Treynor Ratio of 11.94 with a Alpha of -1.92 and a Sharpe Ratio of 0.87. Its Mean Return is 1.05 while VTV’s Beta is 0.98. Furthermore, the fund has a R-squared of 92.61 and a Standard Deviation of 13.78.
The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Beta of 0.98 and a Standard Deviation of 15.01. Its R-squared is 96.78 while EFA’s Alpha is 0.47. Furthermore, the fund has a Treynor Ratio of 5.33 and a Sharpe Ratio of 0.41.
VTV’s Mean Return is 0.48 points higher than that of EFA and its R-squared is 4.17 points lower. With a Standard Deviation of 13.78, VTV is slightly less volatile than EFA. The Alpha and Beta of VTV are 2.39 points lower and 0.00 points lower than EFA’s Alpha and Beta.
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VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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 VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.
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%.
VTV’s CAGR is 5.60 percentage points higher than that of EFA and as a result, would have yielded $14,894 more on a $10,000 investment. Thus, VTV outperformed EFA by 5.60% annually.
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