What IEFA actually is

IEFA is an iShares ETF from BlackRock that follows the MSCI EAFE Investable Market Index. EAFE stands for Europe, Australasia and the Far East, the developed markets outside the United States and Canada. The “investable market” part means it includes small and mid-sized companies as well as the large ones.

It is part of the iShares Core range, the family of funds designed as portfolio building blocks. iShares was originally launched by Barclays in 2000 and bought by BlackRock in 2009.

How it compares with VEA

IEFA and Vanguard’s VEA do a similar job. The main differences are:

  • Canada. IEFA does not include Canada, while VEA does.
  • Costs. The two funds’ fees differ slightly, so compare the current expense ratios.
  • Index provider. MSCI against FTSE. The two classify some markets differently, but performance is usually close.

For most investors, the choice depends on the broker, the fees and the other funds already held.

Distributions

IEFA usually pays dividends twice a year. The yield is typically higher than for US stock funds, since many European and Asian companies pay out a larger share of profits. As with other international funds, foreign withholding taxes can apply to the dividends.

What to keep in mind

  • Currency swings. Euro, yen and pound moves change returns for dollar investors.
  • No emerging markets. Countries like China, India and Brazil are not included.
  • Different sector mix. Less technology, more financials and industrials.

Quick take

IEFA is a way to diversify beyond the US into developed markets. If you already hold a fund like VEA, there is no need to own both, because they overlap heavily.