The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between VUG and EFA? And which fund is better?
The expense ratio of VUG is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%). VUG also has a higher exposure to the technology sector and a lower standard deviation. Overall, VUG has provided higher returns than EFA over the past ten years.
In this article, we’ll compare VUG vs. EFA. We’ll look at holdings and risk metrics, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VUG’s and EFA’s performance, fund composition, and annual returns and examine how these affect their overall returns.
Summary
| VUG | EFA | |
| Name | Vanguard Growth Index Fund ETF Shares | iShares MSCI EAFE ETF |
| Category | Large Growth | Foreign Large Blend |
| Issuer | Vanguard | iShares |
| AUM | 165.53B | 56.77B |
| Avg. Return | 17.58% | 6.47% |
| Div. Yield | 0.57% | 2.28% |
| Expense Ratio | 0.04% | 0.32% |
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% 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%.
VUG’s dividend yield is 1.71% lower than that of EFA (0.57% vs. 2.28%). Also, VUG yielded on average 11.11% more per year over the past decade (17.58% vs. 6.47%). The expense ratio of VUG is 0.28 percentage points lower than EFA’s (0.04% vs. 0.32%).
Fund Composition
Industry Exposure
| VUG | EFA | |
| Technology | 39.05% | 9.68% |
| Industrials | 5.13% | 15.01% |
| Energy | 0.32% | 3.51% |
| Communication Services | 16.49% | 5.68% |
| Utilities | 0.0% | 3.35% |
| Healthcare | 8.09% | 12.8% |
| Consumer Defensive | 2.41% | 10.56% |
| Real Estate | 2.46% | 3.01% |
| Financial Services | 6.75% | 16.88% |
| Consumer Cyclical | 17.78% | 11.62% |
| Basic Materials | 1.52% | 7.91% |
The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.
VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.
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%.
VUG is 29.37% more exposed to the Technology sector than EFA (39.05% vs 9.68%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 6.16% higher and 10.81% higher respectively (17.78% vs. 11.62% and 16.49% vs. 5.68%). In total, Energy, Basic Materials, and Consumer Defensive also make up 17.73% less of the fund’s holdings compared to EFA (4.25% vs. 21.98%).
Holdings
| VUG Holdings | Weight |
| Apple Inc | 10.13% |
| Microsoft Corp | 9.52% |
| Amazon.com Inc | 6.88% |
| Facebook Inc Class A | 3.89% |
| Alphabet Inc Class A | 3.43% |
| Alphabet Inc Class C | 3.22% |
| Tesla Inc | 2.44% |
| NVIDIA Corp | 2.21% |
| Visa Inc Class A | 1.78% |
| PayPal Holdings Inc | 1.6% |
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
| 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%.
Risk Analysis
| VUG | EFA | |
| Mean Return | 1.44 | 0.57 |
| R-squared | 92.48 | 96.78 |
| Std. Deviation | 14.76 | 15.01 |
| Alpha | 1.81 | 0.47 |
| Beta | 1.04 | 0.98 |
| Sharpe Ratio | 1.13 | 0.41 |
| Treynor Ratio | 16.13 | 5.33 |
The Vanguard Growth Index Fund ETF Shares (VUG) has a Sharpe Ratio of 1.13 with a Alpha of 1.81 and a Standard Deviation of 14.76. Its Mean Return is 1.44 while VUG’s Treynor Ratio is 16.13. Furthermore, the fund has a R-squared of 92.48 and a Beta of 1.04.
The iShares MSCI EAFE ETF (EFA) has a Alpha of 0.47 with a R-squared of 96.78 and a Mean Return of 0.57. Its Beta is 0.98 while EFA’s Standard Deviation is 15.01. Furthermore, the fund has a Treynor Ratio of 5.33 and a Sharpe Ratio of 0.41.
VUG’s Mean Return is 0.87 points higher than that of EFA and its R-squared is 4.30 points lower. With a Standard Deviation of 14.76, VUG is slightly less volatile than EFA. The Alpha and Beta of VUG are 1.34 points higher and 0.06 points higher than EFA’s Alpha and Beta.
Performance
Annual Returns
| Year | VUG | EFA |
| 2020 | 40.16% | 7.92% |
| 2019 | 37.26% | 21.94% |
| 2018 | -3.32% | -13.83% |
| 2017 | 27.8% | 24.94% |
| 2016 | 6.13% | 0.96% |
| 2015 | 3.32% | -0.9% |
| 2014 | 13.62% | -5.04% |
| 2013 | 32.38% | 22.62% |
| 2012 | 17.03% | 17.22% |
| 2011 | 1.87% | -12.18% |
| 2010 | 17.11% | 7.52% |
VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VUG | $10,000 | $54,735 | 17.58% |
| EFA | $10,000 | $18,269 | 6.47% |
A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
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%.
VUG’s CAGR is 11.11 percentage points higher than that of EFA and as a result, would have yielded $36,466 more on a $10,000 investment. Thus, VUG outperformed EFA by 11.11% annually.
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