IEFA Is a Great Choice for Most, but I Like VEA ETF Better

For investors in the United States, it's pretty easy to get overexposed to domestic stocks

These are the brands that you're most used to and the companies that you see every day

It's easy to load up on what you know

Heck, even Warren Buffett makes that a central theme of his

But you shouldn't forget international exposure, and exchange-traded funds (ETFs) are some of the best ways to get there

ETFs give you exposure to hundreds or thousands of stocks with the click of a button

I actually think IEFA is a perfectly fine fund

But it's not my favorite for international exposure

Image source: Getty Images

IEFA vides a strong starting point IEFA tracks the MSCI EAFE Investable Market Index, which is a market-cap weighted index that includes large-, mid-, and small-cap stocks from developed outside the U

And Canada. (EAFE stands for Europe, Australia and Asia, and the Far East. ) Because it also excludes emerging, you won't find any stocks from nations China, Brazil, or India

Ly, IFEA is an excellent fund, and it's widely held for good reason

Why VEA is the better choice I'm not sure you could call IEFA vs

VEA an apples-to-oranges comparison

It's more comparing a good apple to one that's a little shinier

VEA tracks the FTSE Developed All Cap ex US Index

So it gives you access to small-, mid-, and large-cap stocks, in developed companies outside the U

But un IEFA, it also includes Canada and South Korea

Top holdings also include ASML, Nestle, Novo Nordisk, and AstraZeneca

But you also find Toyota Motor in the top 10 of the VEA

No stock has a weighting of more than 1

VEA also gives you slightly better returns

The bottom line There may be times when you want to invest in IEFA rather than VEA

For example, VEA might not be suitable if your portfolio already includes significant Canadian holdings, or is overweight in energy and natural resources, a sector where Canadian companies are minent

But in general, if you're looking for the efficient, affordable way to get international exposure from developed countries, VEA is the better choice

It's slightly cheaper, it offers more diversification, and it outperforms the IEFA

If you're building a set-it-and-forget-it portfolio, those little differences can add up in the long run

Patrick Sanders has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends ASML and Vanguard Tax-Managed Funds - Vanguard Ftse Developed ETF

The Motley Fool recommends AstraZeneca Plc, Nestlé, and Novo Nordisk

The Motley Fool has a disclosure policy.