The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between EEM and BIV? And which fund is better?
The expense ratio of EEM is 0.63 percentage points higher than BIV’s (0.68% vs. 0.05%). EEM also has a high exposure to the technology sector while BIV is mostly comprised of AAA bonds. Overall, EEM has provided higher returns than BIV over the past ten years.
In this article, we’ll compare EEM vs. BIV. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EEM’s and BIV’s holdings, annual returns, and performance and examine how these affect their overall returns.
Summary
| EEM | BIV | |
| Name | iShares MSCI Emerging Markets ETF | Vanguard Intermediate-Term Bond Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Intermediate-Term Bond |
| Issuer | iShares | Vanguard |
| AUM | 30.33B | 39.05B |
| Avg. Return | 5.47% | 5.31% |
| Div. Yield | 1.48% | 2.06% |
| Expense Ratio | 0.68% | 0.05% |
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.
EEM’s dividend yield is 0.58% lower than that of BIV (1.48% vs. 2.06%). Also, EEM yielded on average 0.16% more per year over the past decade (5.47% vs. 5.31%). The expense ratio of EEM is 0.63 percentage points higher than BIV’s (0.68% vs. 0.05%).
Fund Composition
Holdings
| EEM Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 6.36% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.58% |
| Tencent Holdings Ltd | 4.41% |
| Samsung Electronics Co Ltd | 4.05% |
| Meituan | 1.24% |
| Vale SA | 1.04% |
| Naspers Ltd Class N | 1.04% |
| Reliance Industries Ltd Shs Dematerialised | 0.97% |
| Infosys Ltd | 0.92% |
| China Construction Bank Corp Class H | 0.83% |
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
| BIV Bond Sectors | Weight |
| AAA | 54.51% |
| BBB | 25.24% |
| A | 16.97% |
| AA | 3.1% |
| Others | 0.15% |
| Below B | 0.03% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.
Risk Analysis
| EEM | BIV | |
| Mean Return | 0.38 | 0.35 |
| R-squared | 83.5 | 95.12 |
| Std. Deviation | 17.79 | 4.09 |
| Alpha | -2.33 | -0.07 |
| Beta | 1.08 | 1.33 |
| Sharpe Ratio | 0.22 | 0.89 |
| Treynor Ratio | 2.22 | 2.72 |
The iShares MSCI Emerging Markets ETF (EEM) has a Beta of 1.08 with a Sharpe Ratio of 0.22 and a R-squared of 83.5. Its Alpha is -2.33 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Mean Return of 0.38 and a Treynor Ratio of 2.22.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a R-squared of 95.12 with a Alpha of -0.07 and a Mean Return of 0.35. Its Beta is 1.33 while BIV’s Standard Deviation is 4.09. Furthermore, the fund has a Treynor Ratio of 2.72 and a Sharpe Ratio of 0.89.
EEM’s Mean Return is 0.03 points higher than that of BIV and its R-squared is 11.62 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than BIV. The Alpha and Beta of EEM are 2.26 points lower and 0.25 points lower than BIV’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | BIV |
| 2020 | 17.56% | 9.71% |
| 2019 | 17.67% | 10.19% |
| 2018 | -14.98% | -0.09% |
| 2017 | 36.42% | 3.8% |
| 2016 | 10.51% | 2.86% |
| 2015 | -15.41% | 1.23% |
| 2014 | -2.82% | 7.0% |
| 2013 | -3.14% | -3.44% |
| 2012 | 17.32% | 7.02% |
| 2011 | -18.87% | 10.62% |
| 2010 | 15.93% | 9.55% |
EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| BIV | $10,000 | $17,492 | 5.31% |
A $10,000 investment in EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.
EEM’s CAGR is 0.16 percentage points higher than that of BIV and as a result, would have yielded $1,914 less on a $10,000 investment. Thus, EEM outperformed BIV by 0.16% annually.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
