IEFA vs VXUS: A Comprehensive Comparison
LAST UPDATED: June 16, 2023 | By Conrad Golly
IEFA is issued by iShares and tracks the MSCI EAFE index, which includes large and mid-cap stocks from developed markets in Europe, Asia, and Australia.
On the other hand, VXUS is issued by Vanguard and tracks the FTSE Global All Cap ex US index, which includes stocks from both developed and emerging markets outside of the US.
Understanding the differences between these two funds and the analysis of how they fit into an investor’s portfolio is important. In this article, we will take a closer look at IEFA vs VXUS, their top holdings, performance, and other key factors that investors should consider before making a decision.
Key Takeaways IEFA vs VXUS
- IEFA and VXUS are two popular international equity ETFs that offer exposure to non-US developed and emerging markets.
- IEFA tracks the MSCI EAFE index and includes large and mid-cap stocks from developed markets in Europe, Asia, and Australia, while VXUS tracks the FTSE Global All Cap ex US index and includes stocks from both developed and emerging markets outside of the US.
- Investors should consider their investment goals, risk tolerance, and portfolio diversification needs before choosing between IEFA and VXUS.
IEFA and VXUS are two international equity ETFs that have been gaining popularity among investors.
While both funds offer exposure to non-US developed and emerging markets, they have some key differences that investors should be aware of before deciding which one to invest in.
IEFA vs VXUS: What’s the Difference?
IEFA and VXUS are two popular ETF products that investors can use to gain exposure to the international equity market. While both products invest in foreign large-cap stocks, there are several differences between the two that investors should be aware of.
Investment Strategy IEFA vs VXUS
IEFA tracks the MSCI EAFE Investable Market Index, which includes large and mid-cap stocks from developed markets in Europe, Australasia, and the Far East. VXUS, on the other hand, tracks the FTSE Global All Cap ex US Index, which includes stocks from both developed and emerging markets outside of the US.
Holdings
IEFA holds over 2,500 securities, while VXUS holds over 7,000 securities. VXUS has a more diverse portfolio, with exposure to a wider range of countries and sectors. IEFA has a higher concentration of holdings in Japan, the United Kingdom, and France.
Performance and Return
Over the past 10 years, IEFA has slightly outperformed VXUS, with an annualized return of 5.14% compared to VXUS’s 4.52% return. However, past performance is not a guarantee of future results.
Expense Ratio
Both IEFA and VXUS have the same expense ratio of 0.07%, making them relatively low-cost options for investors.
Buy and Sell Information
IEFA and VXUS are both highly liquid ETFs with tight bid-ask spreads. Investors can buy and sell shares of these ETFs throughout the trading day on major exchanges.
Issuer and AUM
IEFA is issued by iShares, a subsidiary of BlackRock, while VXUS is issued by Vanguard. As of May 2023, IEFA has an AUM of $189.5 billion, while VXUS has an AUM of $135.7 billion.
Liability and Security
ETFs are considered securities, and as such, investors in IEFA and VXUS have the same legal protections as they would with any other security. However, investors should be aware of the underlying index and holdings of these ETFs, as well as the risks associated with investing in foreign securities.
Understanding IEFA
IEFA, or iShares Core MSCI EAFE ETF, is an exchange-traded fund that aims to track the performance of the MSCI EAFE Investable Market Index. This index is designed to measure the equity market performance of large and mid-cap stocks from developed markets, excluding the US and Canada.
IEFA is managed by BlackRock’s iShares and was launched on October 18, 2012. It has an expense ratio of 0.07%, which is relatively low compared to other similar products.
IEFA holds a diversified portfolio of assets, with over 2,500 holdings as of the end of May 2023. Its top holdings include companies such as Nestle, Roche, and Novartis. The fund has a dividend yield of 2.55% and has a price-to-earnings ratio of 16.63.
Investors can buy and sell shares of IEFA on stock exchanges throughout the day, making it a convenient and accessible investment option. The fund is also a popular choice for investors looking for exposure to international markets, as it provides broad exposure to developed markets outside of North America.
IEFA’s performance is measured against the MSCI EAFE Investable Market Index, which includes companies from 21 developed markets. Over the past ten years, for example, IEFA has provided lower returns than some other similar products, such as VXUS. However, it is important to note that past performance is not necessarily indicative of future results.
Understanding VXUS
VXUS, or Vanguard Total International Stock ETF, is a passively managed exchange-traded fund that tracks the performance of the FTSE Global All Cap ex US Index. This ETF offers broad exposure to equity markets outside of the U.S., including both developed and emerging markets.
As of June 2023, VXUS has an expense ratio of 0.08%, which is slightly higher than the expense ratio of its competitor, iShares Core MSCI EAFE ETF (IEFA), which has an expense ratio of 0.07%. However, VXUS has a higher dividend yield of 2.51%, compared to IEFA’s 2.16%.
VXUS holds a portfolio of over 7,000 securities from companies across the world, with a large portion of its holdings in Japan, the United Kingdom, and Canada. The ETF has over $1 trillion in assets under management and is one of the most popular international ETFs available.
Investors can buy and sell shares of VXUS on the stock exchange throughout the day, making it a convenient and accessible investment product. The ETF has provided investors with a return of 7.81% over the past year and an annualized return of 4.31% over the past five years.
VXUS is also available in mutual fund form, allowing investors to access the same underlying portfolio of securities. The mutual fund version of VXUS has a slightly higher expense ratio of 0.11% but offers the same broad exposure to international markets.
Comparing IEFA and VXUS
IEFA and VXUS are two popular ETFs that provide investors with exposure to international equities. While both funds have similar investment objectives, there are some key differences that investors should be aware of before deciding which one to hold in their portfolio.
Holdings and Performance
IEFA tracks the MSCI EAFE Index, which is made up of large and mid-cap stocks from developed markets in Europe, Australasia, and the Far East. On the other hand, VXUS tracks the FTSE Global All Cap ex US Index, which includes large, mid, and small-cap stocks from both developed and emerging markets outside of the US.
Over the past 10 years, IEFA has yielded an average annual return of 5.79%, while VXUS has yielded an average annual return of 6.53%. However, past performance is not necessarily indicative of future results.
Expense Ratio and Holdings
Both IEFA and VXUS have an expense ratio of 0.07%, which is relatively low compared to other ETFs in their respective categories. IEFA has 2,614 holdings, while VXUS has 7,758 holdings, making VXUS more diversified.
Assets and AUM
IEFA has $95.78 billion in assets under management, while VXUS has $36.23 billion. However, it is worth noting that both funds have experienced net outflows in recent years.
Liability and Services
Both IEFA and VXUS are ETF products issued by iShares and Vanguard, respectively. As with any security, investors should be aware of the risks associated with investing in ETFs, including market risk, liquidity risk, and potential tax liabilities.
Underlying Index and Number of Holdings
IEFA tracks the MSCI EAFE Index, which has 926 holdings, while VXUS tracks the FTSE Global All Cap ex US Index, which has 9,097 holdings. Investors should consider the underlying index and number of holdings when deciding which ETF to invest in.
IEFA vs VXUS: Which One Should You Choose?
When it comes to choosing between IEFA and VXUS, investors need to consider a variety of factors before making a decision.
Here’s a quick rundown of some of the key differences between these two ETFs:
Expense Ratio
IEFA and VXUS both have low expense ratios of 0.07%. This means that investors pay $7 in fees for every $10,000 invested in either ETF.
Holdings and Assets
IEFA holds around 2,600 stocks, while VXUS holds over 8,000 international stocks. This means that VXUS offers more diversified exposure to international markets.
Additionally, VXUS has a higher AUM (assets under management) than IEFA, which could make it easier to buy and sell shares without affecting the market price.
Sell and Buy Information
Both IEFA and VXUS are highly liquid ETFs, which means that investors can buy and sell shares easily on the open market. However, it’s important to note that investors should always check the bid-ask spread before placing a trade, as this can impact the volatility and the total cost of the transaction.
Security and Liability
Both IEFA and VXUS are considered to be relatively safe ETFs, as they hold a large number of securities and are diversified across multiple markets.
However, investors should always be aware of the risks associated with investing in international markets, such as currency fluctuations and political instability.
Services and Issuer
IEFA is issued by BlackRock, while VXUS is issued by Vanguard. Both of these companies are well-respected in the ETF industry and offer a range of other investment products and services.
Top Holdings of IEFA and VXUS
When comparing IEFA and VXUS, it’s important to take a closer look at their top holdings. These holdings can give investors a further perspective and better understanding of the types of companies each fund invests in and how diversified their portfolios are.
IEFA Top Holdings
IEFA, or the iShares Core MSCI EAFE ETF, has a total of 2,504 holdings. Its top 10 holdings make up 13.13% of its total net assets. Here are the top five holdings of IEFA:
- Nestle SA: A Swiss multinational food and drink company that produces a wide range of products, including baby food, bottled water, and pet food.
- ASML Holding NV: A Dutch company that develops and produces advanced technology systems for the semiconductor industry.
- Toyota: A Japanese multinational automotive manufacturer that produces cars, trucks, and motorcycles.
- Roche Holding AG: A Swiss multinational healthcare company that develops and produces pharmaceuticals and diagnostic equipment.
- LVMH Moet Hennessy Louis Vuitton SE: A French multinational luxury goods conglomerate that produces and sells high-end fashion, jewelry, and cosmetics.
VXUS Top Holdings
VXUS, or the Vanguard Total International Stock Index Fund ETF Shares, has a total of 6,579 holdings. Its top 10 holdings make up 8.62% of its total net assets. Here are the top five holdings of VXUS:
- Nestle SA: Same as IEFA
- Tencent Holdings Ltd: A Chinese multinational conglomerate that specializes in various internet-related services and products.
- Alibaba Group Holding Ltd: A Chinese multinational technology company that specializes in e-commerce, retail, and technology.
- Taiwan Semiconductor Manufacturing Co Ltd: A Taiwanese multinational semiconductor manufacturing company.
- Novartis AG: A Swiss multinational pharmaceutical company that develops and produces a wide range of drugs.
IEFA vs VXUS: Performance Comparison
The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard Total International Stock Index Fund ETF (VXUS) are two popular investment options for investors looking to gain exposure to international equities.
Both funds seek to track the performance of the MSCI EAFE Investable Market Index, which includes large and mid-cap stocks from developed markets outside of the United States and Canada.
IEFA and VXUS have similar underlying holdings, with both funds investing in developed and emerging markets. However, there are some key differences between the two funds when it comes to their performance and expenses.
According to the fact sheet for IEFA, the fund has an expense ratio of 0.07%, while VXUS has an expense ratio of 0.08%. IEFA has slightly outperformed VXUS in terms of total returns over the past five years, with an average annual return of 8.17% compared to VXUS’s 7.99%.
IEFA has a slightly larger AUM than VXUS, with $95.78 billion compared to VXUS’s $55.38 billion. However, both funds have a similar number of holdings, with IEFA holding 2,556 securities and VXUS holding 6,096 securities.
In terms of MSCI EAFE Investable Market Index exposure, IEFA has a 99.4% allocation, while VXUS has a 98.5% allocation. This means that IEFA is more closely tracking the benchmark index than VXUS.
It’s important to note that past performance is not indicative of future results, and investors should consider their own investment goals and risk tolerance before investing in either fund.
Additionally, investors should be aware of the risks and potential liabilities associated with investing in international securities.
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