International ETFs: EEM and IEFA Offer Distinct Global ETF Choices

**iShares Core MSCI EAFE ETF **(IEFA 0.31%) and iShares MSCI Emerging Markets ETF (EEM 0.32%) differ sharply in cost, yield, sector exposure, and recent returns, reflecting their distinct focuses on developed versus emerging markets.

IEFA targets developed markets outside the United States and Canada, providing broad diversification across Europe, Asia, and Australia. EEM, in contrast, invests in large- and mid-cap companies from emerging markets, particularly in Asia and Latin America. This comparison explores how these two global equity ETFs stack up on cost, performance, risk, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.

EEM’s expense ratio is substantially higher than IEFA’s, making IEFA far more affordable for long-term holders. IEFA also offers a higher dividend yield, making it more appealing to income-focused investors seeking steady payouts.

Performance & risk comparison

What’s inside

EEM tracks large- and mid-cap companies from emerging economies, leaning heavily on technology (34%) and Asian giants. Its top holdings are Taiwan Semiconductor Manufacturing(TSM 0.97%) at 12.51%, Samsung Electronics Ltd(SSU +3.26%) at 5.24%, and Tencent Holdings Ltd(TCEHY 0.75%) at 3.67%. With 1,223 holdings and a fund age of 23 years, EEM provides deep exposure to emerging-market growth stories but is concentrated in a few tech giants.

IEFA, meanwhile, covers more than 2,600 companies from developed markets, with a tilt toward financial services (22%) and industrials (21%). Its largest positions include Asml Holding Nv(ASML 1.04%), Astrazeneca Plc(AZN +3.98%), and Novartis Ag(NVS 0.05%), each accounting for less than 2.3% of assets. IEFA’s diversification is broader, and its sector mix tends toward stability and income over high-octane growth.

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What this means for investors

International stocks are an important part of most investment portfolios. Here is how two key international exchange-traded funds (ETFs), iShares Core MSCI EAFE ETF (IEFA) and iShares MSCI Emerging Markets ETF (EEM), match up.

Let’s start with IEFA. This fund holds 2,600 stocks across many developed markets. Its chief advantage over EEM is its low fees. IEFA has an expense ratio of 0.07%, while EEM has an expense ratio of 0.72%. IEFA also has a higher dividend yield of 3.6%, while EEM has a dividend yield of 2.2%.

EEM, on the other hand, is an emerging markets ETF. Therefore, it is more oriented to higher-risk growth stocks. EEM has performed well over the last year, recording a return of 26.2%, while IEFA has returned 14.5%.

In summary, IEFA is better suited to income-oriented investors, those who are more risk-averse, and cost-conscious investors. Meanwhile, more aggressive investors may favor EEM for its potential to deliver outsize returns.