iShares Core MSCI EAFE ETF (IEFA) Offers Broader Market Coverage at Lower Costs Than iShares MSCI Emerging Markets ETF (EEM)

Core Insights - The iShares Core MSCI EAFE ETF (IEFA) and the iShares MSCI Emerging Markets ETF (EEM) offer different approaches to global equity exposure, with IEFA focusing on developed markets outside the U.S. and Canada, while EEM targets emerging economies [1] Cost & Size Comparison - IEFA has a significantly lower expense ratio of 0.07% compared to EEM's 0.72% [2] - As of October 27, 2025, IEFA's one-year return is 19.2%, while EEM's is 22.9% [2] - IEFA has a higher dividend yield of 2.9% compared to EEM's 2.1% [3] - Both ETFs have similar beta values, with EEM at 1.06 and IEFA at 1.07, indicating comparable volatility [2] - Assets under management (AUM) for IEFA stand at $159.2 billion, while EEM has $21.2 billion [2] Performance & Risk Analysis - Over the past five years, EEM experienced a maximum drawdown of -39.82%, while IEFA's maximum drawdown was -30.41% [4] - A $1,000 investment in IEFA would have grown to $1,537 over five years, compared to $1,244 for EEM [4] Portfolio Composition - IEFA holds 2,611 stocks, with significant allocations in financial services (22%), industrials (20%), and healthcare (10%) [5] - Major holdings in IEFA include ASML Holding NV, SAP, and Nestlé [5] - EEM consists of 1,198 holdings, with a heavier focus on technology (25%) and financial services (23%) [5] - Top allocations in EEM include Taiwan Semiconductor Manufacturing, Tencent Holdings, and Alibaba Group Holding [6] Investment Preference - IEFA is favored due to its lower expense ratio, higher dividend yield, and better historical performance compared to EEM [7][9] - EEM's top five holdings constitute over 25% of its portfolio, indicating a lack of diversification, with Taiwan Semiconductor Manufacturing alone accounting for 12% [8]