Which International ETF Is the Better Buy: iShares’ Developed Market IEFA or Emerging Markets EEM?
Key Points
iShares Core MSCI EAFE ETF features a significantly lower expense ratio.
iShares Core MSCI EAFE ETF provides a higher trailing-12-month dividend yield of 3.4%.
While iShares MSCI Emerging Markets ETF has seen stronger 1-year total returns, it has also experienced a deeper maximum drawdown over the last five years.
iShares Core MSCI EAFE ETF (NYSEMKT:IEFA) offers low-cost, diversified exposure to developed markets like Europe and Japan, whereas iShares MSCI Emerging Markets ETF (NYSEMKT:EEM) targets high-growth developing economies with higher management fees and risk.
Investors looking beyond U.S. borders often choose between established developed markets and rapidly growing emerging economies to diversify their portfolios. While both funds are issued by iShares, they serve distinct roles for an investor, varying significantly in management costs, geographic focus, and historical risk profiles.
Snapshot (cost & size)
| Metric | EEM | IEFA |
|---|---|---|
| Issuer | iShares | iShares |
| Share price | $66.80 (as of 2026-10-09) | $96.52 (as of 2026-10-09) |
| Expense ratio | 0.72% | 0.07% |
| 1-yr return (as of Oct. 26, 2026) | 14.5% | 12.4% |
| Dividend yield | 1.6% | 3.4% |
| Beta | 0.76 | 0.80 |
| AUM | $31.0 billion | $189.5 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The iShares Core fund is substantially more affordable for long-term holders, sporting an expense ratio of 0.07% compared to 0.72% for the iShares Emerging Markets fund. For income-seeking investors, the iShares Core fund also offers a more robust payout, currently maintaining a 1.77 percentage point yield advantage over its emerging markets peer.
Performance & risk comparison
| Metric | EEM | IEFA |
|---|---|---|
| Max drawdown (5 yr) | (33.8%) | (30.0%) |
| Growth of $1,000 over 5 years (total return) | $1,479 | $1,535 |
What's inside
iShares Core MSCI EAFE ETF holds 2,624 stocks, providing broad coverage of developed markets outside North America. The fund tracks the MSCI EAFE IMI Index using a representative sampling technique to capture a mix of growth and value stocks across various market capitalizations. Its largest positions include Asml Holding (ENXTAM:ASML) at 2.80%, HSBC Holdings (LSE:HSBA) at 1.27%, and Roche (SWX:ROP) at 1.21%. The fund was launched in 2012. iShares Core MSCI EAFE ETF has paid $3.29 per share over the trailing 12 months, which on its recent ~$96.52 share price works out to a 3.4% yield.
iShares MSCI Emerging Markets ETF manages a smaller portfolio of 1,187 positions concentrated in developing nations. This fund endeavors to replicate an index composed of large and medium-sized company stocks within emerging markets like China, India, and Brazil. Its sector breakdown shows a heavy tilt toward information technology at 44%, followed by financials at 19%, and consumer discretionary at 7%. Its top holdings include Taiwan Semiconductor Manufacturing at 15.92%, Samsung Electronics Ltd (KOSE:A005930) at 7.38%, and SK Hynix at 5.60%. The fund was launched in 2003. iShares MSCI Emerging Markets ETF has paid $1.11 per share over the trailing 12 months, which on its recent ~$66.80 share price works out to a 1.6% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
If your portfolio looks like most American investors' portfolios, it is probably heavy on U.S. stocks. Adding international exposure is one of the most straightforward ways to diversify, and IEFA and EEM offer two very different paths to get there. One is through stable developed economies, the other through faster-growing but less predictable ones.
One number in this comparison stands out above everything else: the fee gap. EEM charges 10 times what IEFA does, one of the largest cost gaps between two funds in the ETF market. Over a decade of holding, that difference compounds into a drag on returns that EEM would need to consistently overcome just to break even against its cheaper rival.
Look at the five-year numbers and IEFA wins on returns, volatility, and income. EEM has had some recent momentum, but one strong year does not make up for paying ten times more in fees every year you hold the fund.
A truly diversified international portfolio often holds both developed and emerging market funds rather than choosing one. If simplicity requires picking just one, IEFA is the more practical starting point. EEM makes the most sense as a complement for those who specifically want emerging market exposure and are comfortable paying a significant premium for it.
HSBC Holdings is an advertising partner of Motley Fool Money. Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool recommends Roche Holding AG and Roper Technologies. The Motley Fool has a disclosure policy.