EEM vs. BIV: What’s The Difference?

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

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 - Holdings

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

EEM vs. BIV - 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

EEM vs. BIV - 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.


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