The iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) provides massive liquidity and a slightly higher yield, while the State Street SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) offers a lower expense ratio and stronger one-year performance.
Both IEFA and SPDW offer broad exposure to developed markets outside the United States. While the iShares fund is an industry titan with nearly $200 billion in assets, the State Street offering competes as an ultra-low-cost alternative for investors seeking efficient international diversification.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
SPDW is the more affordable ETF with a 0.03% expense ratio compared to 0.07% for IEFA. However, IEFA provides a higher payout with a 3.3% yield versus 2.9% for SPDW.
Performance & risk comparison
What’s inside
The iShares Core MSCI EAFE ETF holds 2,616 stocks, providing broad coverage across diversified sectors. The fund seeks to track the MSCI EAFE IMI Index through representative sampling, focusing on growth and value stocks across various market capitalizations. Sector allocation leads with financial services at 24%, followed by industrials at 20% and technology at 11%. Its largest positions include ASML Holding at 2.58%, HSBC Holdings at 1.35%, and Roche Holding at 1.24%. The fund was launched in 2012, and has paid $3.29 per share over the trailing 12 months, which on its recent ~$101 share price works out to a 3.3% yield.
The State Street SPDR Portfolio Developed World ex-US ETF tracks the S&P Developed Ex-U.S. BMI Index and holds 2,433 stocks. The fund serves as a cost-effective building block in the SPDR Portfolio series, offering comprehensive access to international equity markets while specifically excluding the United States. Sector exposures are similar, with financial services at 25%, industrials at 18%, and technology at 15%. Top holdings include Samsung at 2.50%, SK Hynix Inc at 1.97%, and ASML Holding at 1.94%. The fund was launched in 2007, and has paid $1.52 per share over the trailing 12 months, which on its recent ~$52 share price works out to a 2.9% yield.
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Which looks like the better buy
Investors seeking international exposure can find an efficient means to do so through the iShares Core MSCI EAFE ETF (IEFA) and State Street SPDR Portfolio Developed World ex-US ETF (SPDW). Both hold over 2,000 stocks targeting developed markets. Which one to pick depends on the factors that matter most to you.
Personally, I would choose SPDW over IEFA for several reasons. One key consideration is that SPDW invests in companies based in South Korea. IEFA does not because it tracks the MSCI EAFE IMI Index, which classifies South Korea as an emerging market and not a developed one.
South Korea is important because of companies such as Samsung and SK Hynix, both top holdings in SPDW. Due to the artificial intelligence boom, Samsung and SK Hynix are experiencing outsized growth for their computer memory products. This contributed to SPDW’s superior one-year return.
Another factor is SPDW’s lower expense ratio, which helps you keep more money in your pocket, especially when holding for the long term. That said, IEFA has a far larger AUM, giving the fund greater liquidity, so if that is important to you, IEFA is worthy of consideration.
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HSBC Holdings is an advertising partner of Motley Fool Money. Robert Izquierdo has positions in ASML. The Motley Fool has positions in and recommends ASML. The Motley Fool recommends HSBC Holdings, Roche Holding AG, and Roper Technologies. The Motley Fool has a disclosure policy.
Better International ETF: the iShares IEFA vs. State Street’s SPDW was originally published by The Motley Fool
