VXUS provides significantly broader international diversification by including both developed and emerging markets, holding over 8,600 stocks across dozens of countries, while IEFA focuses solely on developed markets outside North America with around 2,600 holdings. This results in VXUS capturing growth opportunities in emerging economies like China, Taiwan, and India, alongside traditional developed regions such as Europe and Japan. Although IEFA may offer lower volatility and a slightly higher dividend yield in certain periods, VXUS delivers more comprehensive non-U.S. equity coverage at a lower expense ratio, making it a compelling choice for investors seeking maximal global reach in their portfolios. Recent performance shows VXUS edging ahead in total returns over the past year, highlighting the potential benefits of its wider scope.
Detailed Comparison: Why VXUS Delivers Superior Breadth
Investors building international exposure often weigh options like the Vanguard Total International Stock ETF (VXUS) against the iShares Core MSCI EAFE ETF (IEFA). The core distinction lies in market coverage: VXUS tracks the FTSE Global All Cap ex US Index, encompassing developed and emerging markets excluding the United States, while IEFA follows the MSCI EAFE IMI Index, limited to developed markets in Europe, Australasia, and the Far East, excluding both the U.S. and Canada.
VXUS includes approximately 26-28% allocation to emerging markets, bringing in dynamic economies with higher growth potential but added risk. This encompasses substantial positions in China, Taiwan, India, South Korea, and other fast-growing regions. In contrast, IEFA’s exposure remains almost entirely in developed markets, with negligible emerging market inclusion (typically under 1%).
The difference in holdings volume underscores this breadth. VXUS features more than 8,600 individual stocks (recent figures show around 8,646 to 8,691), spreading risk across a vast array of companies, including small- and mid-cap names in both developed and emerging areas. IEFA holds roughly 2,600 stocks (ranging from 2,583 to 2,616 recently), concentrating on larger, more established firms in mature economies.
Geographic breakdown further illustrates the advantage:
VXUS: Europe ~38-41%, Pacific (including Japan) ~25-26%, Emerging Markets ~26-28%, North America (ex-U.S., mainly Canada) ~8%, with smaller slices in Middle East and other regions.
IEFA: Europe ~62%, Asia Pacific (heavy on Japan) ~35-36%, with minimal other exposure.
Japan dominates both funds but weighs heavier in IEFA at around 24-25%, compared to VXUS’s 14-15%. The United Kingdom, Switzerland, France, and Germany feature prominently in IEFA, while VXUS dilutes these with emerging market offsets.
Top holdings reflect these priorities. In VXUS, leading positions include Taiwan Semiconductor Manufacturing (around 3%), Tencent Holdings, Samsung Electronics, Alibaba Group, and ASML, blending tech-heavy emerging market giants with developed market stalwarts. IEFA’s top names lean toward European and Japanese developed plays like ASML Holding, Roche Holding, HSBC Holdings, AstraZeneca, and Novartis, emphasizing pharmaceuticals, finance, and industrials in stable economies.
Cost efficiency favors VXUS with an expense ratio of 0.05%, versus IEFA’s 0.07%. This small difference compounds over time for long-term holders.
Performance varies with market cycles. Over the past year, VXUS has shown stronger total returns in some periods (around 35-37% versus IEFA’s 34-35%), benefiting from emerging market rallies in tech and growth sectors. However, IEFA often exhibits lower volatility due to its developed-market focus, appealing to conservative investors. YTD figures hover around 9% for both, with slight edges shifting based on currency movements and regional momentum.
Sector allocations also diverge due to emerging market inclusion:
VXUS tends toward higher weights in technology (driven by Asian semiconductors and internet firms), financials, and industrials.
IEFA emphasizes financials, industrials, consumer staples, and health care in developed contexts.
Key Comparison Table
| Metric | VXUS (Vanguard Total International Stock ETF) | IEFA (iShares Core MSCI EAFE ETF) |
|---|---|---|
| Index Tracked | FTSE Global All Cap ex US | MSCI EAFE IMI |
| Market Coverage | Developed + Emerging ex-U.S. | Developed ex-U.S. & Canada |
| Number of Holdings | ~8,600+ | ~2,600 |
| Emerging Markets % | ~26-28% | <1% |
| Expense Ratio | 0.05% | 0.07% |
| AUM (Approximate) | ~$138-140 billion | ~$178-179 billion |
| Top Holding Example | Taiwan Semiconductor (~3%) | ASML Holding (~2.2%) |
| Volatility Profile | Slightly higher due to EM exposure | Lower, more predictable |
For U.S. investors prioritizing true global diversification beyond familiar developed markets, VXUS stands out. Its inclusion of emerging markets captures potential upside from populous, rapidly urbanizing economies while maintaining broad developed exposure. This makes it particularly suitable for core portfolio allocations aiming for long-term growth and risk spreading across the non-U.S. world.
IEFA serves well for those preferring stability, higher dividend potential in some environments, and avoidance of emerging market uncertainties like currency fluctuations or geopolitical events. Yet for sheer breadth, VXUS covers more ground, more companies, and more opportunities.
Disclaimer: This is for informational purposes only and does not constitute investment advice. Past performance is no guarantee of future results. Investors should conduct their own research and consider their risk tolerance before making decisions.
