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VXUS vs. IEF: What’s The Difference?

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VXUS is a Vanguard Foreign Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VXUS and IEF? And which fund is better?

The expense ratio of VXUS is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%). VXUS also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, VXUS has provided higher returns than IEF over the past ten years.

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

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Summary

VXUSIEF
NameVanguard Total International Stock Index Fund ETF SharesiShares 7-10 Year Treasury Bond ETF
CategoryForeign Large BlendLong Government
IssuerVanguardiShares
AUM404.73B13.44B
Avg. Return8.41%5.06%
Div. Yield2.44%0.84%
Expense Ratio0.08%0.15%

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.

The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

VXUS’s dividend yield is 1.60% higher than that of IEF (2.44% vs. 0.84%). Also, VXUS yielded on average 3.34% more per year over the past decade (8.41% vs. 5.06%). The expense ratio of VXUS is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%).

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Fund Composition

Holdings

VXUS - Holdings

VXUS HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd1.62%
Tencent Holdings Ltd1.41%
Alibaba Group Holding Ltd Ordinary Shares1.26%
Nestle SA1.1%
Samsung Electronics Co Ltd1.05%
ASML Holding NV0.86%
Roche Holding AG0.81%
Toyota Motor Corp0.67%
LVMH Moet Hennessy Louis Vuitton SE0.61%
Novartis AG0.6%

VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.

ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

VXUSIEF
Mean Return0.560.32
R-squared98.3977.56
Std. Deviation15.125.42
Alpha0.31-1.2
Beta0.991.59
Sharpe Ratio0.40.6
Treynor Ratio5.141.97

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has a Sharpe Ratio of 0.4 with a Standard Deviation of 15.12 and a Treynor Ratio of 5.14. Its Beta is 0.99 while VXUS’s R-squared is 98.39. Furthermore, the fund has a Mean Return of 0.56 and a Alpha of 0.31.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a Treynor Ratio of 1.97 and a R-squared of 77.56. Its Sharpe Ratio is 0.6 while IEF’s Alpha is -1.2. Furthermore, the fund has a Standard Deviation of 5.42 and a Mean Return of 0.32.

VXUS’s Mean Return is 0.24 points higher than that of IEF and its R-squared is 20.83 points higher. With a Standard Deviation of 15.12, VXUS is slightly more volatile than IEF. The Alpha and Beta of VXUS are 1.51 points higher and 0.60 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

VXUS vs. IEF - Annual Returns

YearVXUSIEF
202011.32%9.84%
201921.58%8.38%
2018-14.42%0.82%
201727.52%2.47%
20164.72%1.0%
2015-4.28%1.55%
2014-4.17%8.92%
201315.16%-6.12%
201218.22%4.06%
20110.0%15.46%
20100.0%9.29%

VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% respectively.

The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

VXUS vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VXUS$10,000$19,3158.41%
IEF$10,000$13,4225.06%

A $10,000 investment in VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.

With a $10,000 investment in IEF, the end total would have been $13,422. This equates to a $3,422 profit over 9 years and a compound annual growth rate (CAGR) of 5.06%.

VXUS’s CAGR is 3.34 percentage points higher than that of IEF and as a result, would have yielded $5,893 more on a $10,000 investment. Thus, VXUS outperformed IEF by 3.34% annually.


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