VXUS & IEFA: Reflections on Global Equity

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The matter of international equities, it seems, presents a familiar paradox. One seeks to chart the currents of global capital, yet finds oneself perpetually mapping a shifting, illusory terrain. The two instruments under consideration – the Vanguard Total International Stock ETF (VXUS) and the iShares Core MSCI EAFE ETF (IEFA) – are not merely portfolios of shares, but rather, attempts to capture a fleeting, incomplete reflection of the world’s economic labyrinth. The late Professor Alistair Finch, a scholar of speculative instruments (and, incidentally, a collector of antique astrolabes), once remarked that all financial indices are, at their core, exercises in controlled hallucination.

Both VXUS and IEFA offer a path through this labyrinth, yet their routes diverge. VXUS, in its ambition, encompasses the entirety of the known international world, including those nascent economies still coalescing on the periphery. IEFA, with a more austere disposition, confines itself to the established, the predictable—the developed markets of Europe, Australasia, and the Far East. It is a choice between the sprawling, chaotic potential of the whole, and the refined, if limited, certainty of a carefully curated fragment.

A Catalog of Attributes

Metric VXUS IEFA
Issuer Vanguard iShares
Expense ratio 0.05% 0.07%
1-yr return (as of Jan. 30, 2026) 29.5% 26.6%
Dividend yield 3.1% 3.5%
Beta 1.00 0.73
AUM $573.7 billion $162.6 billion

Beta, as defined by conventional metrics, measures volatility relative to a benchmark, though one might argue that all such measurements are ultimately subjective, dependent on the observer’s chosen frame of reference. The returns quoted are, of course, provisional, subject to the capricious whims of the market.

VXUS, with its modest expense ratio, offers a lower toll for navigating this complex terrain. IEFA, however, yields a slightly greater dividend, a small but not insignificant tribute offered by the established economies it favors. It is a choice between minimizing cost and maximizing immediate return, a dilemma as old as commerce itself.

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Performance & Risk: Echoes in the Mirror

Metric VXUS IEFA
Max drawdown (5 y) -29.43% -30.41%
Growth of $1,000 over 5 years $1,297 $1,353

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The Composition of Shadows

IEFA, in its austerity, holds 2,589 stocks from the developed world, weighted towards financial services, industrials, and healthcare. Its prominent holdings—ASML, Roche, HSBC—are the pillars of established economies. VXUS, by contrast, encompasses over 8,600 stocks, a vast and heterogeneous collection spanning both developed and emerging markets. Taiwan Semiconductor Manufacturing, Tencent, and ASML—the latter appearing in both portfolios, a curious echo—anchor its composition.

The inclusion of emerging markets in VXUS introduces a degree of volatility absent in IEFA. It is akin to adding a layer of mist to an otherwise clear landscape, obscuring the immediate view but hinting at hidden depths. The scholar Borges wrote of a library containing every possible book—VXUS, in its breadth, aspires to a similar completeness, though at the cost of clarity.

For the Cartographer of Capital

The surge in international stocks during 2025, propelled by a weakening dollar and attractive valuations, was a phenomenon observed by both portfolios. VXUS, with its wider net, captured a larger share of this gain, while IEFA, confined to established markets, offered a more predictable, if somewhat diminished, return.

VXUS, with its 8,600+ holdings, represents a comprehensive survey of the global economic landscape, encompassing both the stability of Europe and Japan and the growth potential of China and India. IEFA, with its 2,600 holdings, focuses solely on the developed world, sacrificing potential gains in exchange for reduced risk. The choice, therefore, depends on the investor’s temperament: a willingness to embrace uncertainty, or a preference for the known and predictable.

VXUS is the better choice for those seeking complete international exposure, willing to navigate the complexities of emerging markets. IEFA suits conservative investors who prioritize stability and predictability, even at the cost of potential outperformance. It is a question of embracing the labyrinth, or choosing a well-lit path.

For further guidance on the art of portfolio construction, consult the relevant treatises—or, perhaps, simply allow chance to guide your hand.

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2026-02-07 15:23