VEA
Vanguard FTSE Developed Markets ETF
VEA tracks the FTSE Developed All Cap ex US Index, providing exposure to developed markets outside the United States. The ETF includes large-cap, mid-cap, and small-cap stocks from Europe, Pacific, and Canada, covering approximately 98% of the investable market capitalization in developed international markets. With over 3,900 holdings and an ultra-low 0.05% expense ratio, VEA offers comprehensive, cost-effective exposure to established international economies. It excludes emerging markets, focusing solely on developed economies with stable regulatory environments.
EFA
iShares MSCI EAFE ETF
EFA tracks the MSCI EAFE Index (Europe, Australasia, Far East), providing exposure to developed markets outside of North America. As one of the oldest and most established international ETFs, EFA focuses on large and mid-cap companies across 21 developed markets. The ETF excludes Canada and the United States, focusing specifically on European and Asian developed economies. With nearly $60 billion in assets, EFA is the most liquid international ETF available, offering excellent tradability and tight bid-ask spreads for investors seeking established international exposure.
Key Metrics Comparison
| Metric | VEA (Vanguard) | EFA (iShares) | Winner |
|---|---|---|---|
| Expense Ratio | 0.05% | 0.33% | VEA (-0.28%) |
| Dividend Yield | 3.1% | 3.3% | EFA (+0.2%) |
| 10-Year Annual Return | 5.8% | 5.5% | VEA (+0.3%) |
| Number of Holdings | 3,900+ | 795 | VEA (More diversified) |
| Assets Under Management | $140B | $58B | VEA (Larger AUM) |
| Inception Year | 2007 | 2001 | EFA (Older) |
| Canada Exposure | 7.5% | 0% | VEA (Includes Canada) |
| Small-Cap Exposure | 12% | 0% | VEA (Small-cap included) |
| P/E Ratio | 14.2 | 14.5 | VEA (Slightly cheaper) |
| Price/Book Ratio | 1.6 | 1.7 | VEA (Better valuation) |
| 10-Year Volatility | 16.5% | 16.3% | EFA (Slightly lower) |
| Average Daily Volume | 4.5M shares | 18M shares | EFA (More liquid) |
| Turnover Rate | 3% | 4% | VEA (Lower turnover) |
Performance Comparison
VEA Performance Profile
Competitive returns with ultra-low cost structure providing cost advantage over time. Broad diversification across 3,900+ companies reduces single-stock risk. Includes small-cap exposure (12%) for potential growth opportunities. Canada exposure (7.5%) provides North American diversification beyond US. Slightly better historical returns despite similar market exposure. Lower expense ratio compounds over long investment horizon. All-cap approach captures entire developed markets opportunity set. Better tax efficiency from lower turnover (3%). The cost-effective choice for long-term international investors.
EFA Performance Profile
Established track record as the original international ETF (2001 inception). Higher liquidity with 18M daily shares traded providing excellent tradability. Pure EAFE focus excludes Canada for targeted Europe/Asia exposure. Large/mid-cap focus provides stability with established international companies. Slightly higher dividend yield from mature international companies. Excellent for tactical trading due to high liquidity and tight spreads. Traditional EAFE benchmark widely used by institutional investors. More concentrated portfolio (795 holdings) with larger average position sizes. The liquid choice for active investors and large institutions.
Strategy & Geographic Analysis
VEA: FTSE Developed All Cap Strategy
Comprehensive developed markets exposure:
- Tracks FTSE Developed All Cap ex US Index
- 3,900+ holdings across all market capitalizations
- Ultra-low 0.05% expense ratio
- Large-Cap: 75% (established international leaders)
- Mid-Cap: 13% (growth potential companies)
- Small-Cap: 12% (small company exposure)
- Canada: 7.5% (North American diversification)
- Japan: 22% (largest country allocation)
- United Kingdom: 15% (European anchor)
- France: 9%, Switzerland: 8%, Germany: 8%
- Australia: 6%, South Korea: 4%
EFA: MSCI EAFE Strategy
Traditional EAFE large/mid-cap exposure:
- Tracks MSCI EAFE Index (Europe, Australasia, Far East)
- 795 holdings (large and mid-cap only)
- No Canada or US exposure (pure EAFE)
- Japan: 24% (largest country weight)
- United Kingdom: 15% (second largest)
- France: 11%, Switzerland: 9%, Germany: 8%
- Australia: 7%, Netherlands: 3%
- Denmark: 3%, Sweden: 3%, Hong Kong: 2%
- No small-cap companies included
- Higher liquidity for active trading
Geographic & Market Cap Differences
Key differences in country exposure and market capitalization coverage:
VEA Market Cap Distribution
EFA Market Cap Distribution
Investment Implications
VEA Benefits: Small-cap exposure, lower cost, Canada diversification
EFA Benefits: Higher liquidity, pure EAFE, established benchmark
VEA Risks: Small-cap volatility, currency risk
EFA Risks: Higher cost, no small-cap growth potential
Cost Difference: VEA saves 0.28% annually on expenses
Long-Term Advantage: VEA's cost advantage compounds over time
Holdings & Country Analysis
VEA Top Holdings (Global Leaders)
Note: Lower concentration due to 3,900+ holdings, includes small/mid-caps not shown
EFA Top Holdings (EAFE Leaders)
Note: Similar holdings but higher concentration due to fewer companies (795 vs 3,900)
VEA Country Allocation
EFA Country Allocation
Country Comparison Insights
Sector & Currency Analysis
VEA Sector Allocation
EFA Sector Allocation
Currency Exposure & Risks
Risk & Cost Analysis
VEA Risk Profile
Key Risk Factors: Currency risk, developed markets economic risk, small-cap volatility, geopolitical risk. Cost Advantage: Ultra-low 0.05% expense ratio provides significant long-term savings.
EFA Risk Profile
Key Risk Factors: Currency risk, EAFE economic concentration, large-cap bias, higher expense drag. Liquidity Advantage: Higher trading volume provides better execution for large trades.
Cost vs Performance Trade-off Analysis
Cost Difference: EFA costs 0.28% more annually than VEA
Performance Difference: VEA returned 0.3% more annually over 10 years
Total Advantage: VEA provides 0.58% annual advantage (cost + performance)
On $100,000 over 20 years (6% base return):
• VEA: ~$320,714 (after 0.05% fees, 5.8% net return)
• EFA: ~$291,995 (after 0.33% fees, 5.5% net return)
• Difference: ~$28,719 higher with VEA due to lower costs
Small-Cap Advantage: VEA's 12% small-cap exposure provides growth potential
Canada Diversification: VEA's 7.5% Canada exposure adds North American stability
Note: International returns have been modest recently, making cost differences more impactful.
Small-Cap & Diversification Analysis
VEA's Small-Cap & All-Cap Advantage
Market Coverage: 12% of portfolio in small-cap companies
Growth Potential: Small-caps historically outperform over long term
Diversification: Exposure to 3,900+ companies vs 795 in EFA
Innovation: Small-caps include next-generation international companies
Valuation: Small-caps often trade at valuation discounts
Economic Sensitivity: Small-caps more sensitive to local economic growth
Acquisition Targets: Small-caps often acquisition targets for large multinationals
Canada Inclusion: 7.5% Canada exposure adds resource/energy diversification
EFA's Large/Mid-Cap & Liquidity Focus
Pure Focus: 100% large/mid-cap, no small-cap dilution
Quality: MSCI EAFE companies have proven international business models
Liquidity: 18M daily shares vs 4.5M for VEA
Stability: Large-caps generally more stable during volatility
Dividends: Higher dividend yield (3.3% vs 3.1%)
Global Reach: Established multinationals with global revenue
Brand Power: Well-known international brands
Trading Efficiency: Better for active traders and large institutions
Historical Performance Context
2000-2010 (International Outperformance): EFA had advantage as established option
2010-2020 (US Outperformance): Both underperformed US markets
Currency Impact: Both have similar currency exposure (yen, euro, pound)
Valuation Cycles: International markets currently trade at discounts to US
Future Outlook: International valuations suggest potential catch-up to US
Strategic Consideration: VEA provides better cost structure for long-term holding
Tactical Consideration: EFA provides better liquidity for active positioning
Investor Use Cases & Scenarios
When VEA Excels
Long-Term Buy & Hold: Ultra-low cost compounds over decades
Complete International Exposure: Want all-cap developed markets coverage
Small-Cap Believers: Want international small-cap exposure
Canada Diversification: Want North American exposure beyond US
Cost-Conscious Investors: Want minimum expense drag (0.05%)
Passive Investors: Building permanent international allocation
Tax-Efficient Accounts: Lower turnover (3%) helps in taxable accounts
Core International Holding: As foundation for international allocation
When EFA Excels
Active Traders: Need high liquidity and tight spreads
Institutional Investors: Large trade execution important
EAFE Purists: Want traditional EAFE exposure without Canada
Dividend Focus: Want slightly higher dividend yield
Tactical Allocation: Making short-term international adjustments
Options Traders: Need liquid options market (EFA has options)
Benchmark Tracking: Matching MSCI EAFE institutional benchmark
Established Track Record: Prefer 2001 inception with long history
Investment Recommendation
💰 Choose VEA If:
- You're a long-term buy & hold investor
- Ultra-low cost is your top priority (0.05%)
- You want international small-cap exposure (12%)
- You want Canada diversification (7.5%)
- You prefer maximum diversification (3,900+ holdings)
- You're building a permanent international allocation
- You want the most cost-effective developed markets ETF
- You believe in all-cap approach for international markets
🏦 Choose EFA If:
- You need high liquidity for active trading
- You're making large institutional trades
- You want pure EAFE exposure without Canada
- You prefer established track record (2001 inception)
- You trade options on international ETFs
- You're matching MSCI EAFE institutional benchmark
- You want slightly higher dividend yield (3.3%)
- You make tactical adjustments to international allocation
💡 Portfolio Construction Strategy
For long-term investors: VEA as core international holding. For active traders: EFA for liquidity and trading flexibility. For complete international: VEA for developed + VWO for emerging markets. For currency hedge: Consider VXUS (includes emerging) or currency-hedged versions. For tax efficiency: Both are fairly tax-efficient, but VEA's lower turnover may help. For retirement accounts: VEA for long-term compounding with low costs. For taxable accounts: VEA's lower turnover provides slight tax advantage. For institutional use: EFA for large trade execution and liquidity. For options strategies: EFA has more established options market.