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EEM vs. MDY: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between EEM and MDY? And which fund is better?

The expense ratio of EEM is 0.45 percentage points higher than MDY’s (0.68% vs. 0.23%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than MDY over the past ten years.

In this article, we’ll compare EEM vs. MDY. We’ll look at holdings and annual returns, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EEM’s and MDY’s industry exposure, risk metrics, and performance and examine how these affect their overall returns.

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Summary

EEMMDY
NameiShares MSCI Emerging Markets ETFSPDR S&P MIDCAP 400 ETF Trust
CategoryDiversified Emerging MktsMid-Cap Blend
IssueriSharesSPDR State Street Global Advisors
AUM30.33B21.31B
Avg. Return5.47%13.29%
Div. Yield1.48%0.94%
Expense Ratio0.68%0.23%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

EEM’s dividend yield is 0.54% higher than that of MDY (1.48% vs. 0.94%). Also, EEM yielded on average 7.82% less per year over the past decade (5.47% vs. 13.29%). The expense ratio of EEM is 0.45 percentage points higher than MDY’s (0.68% vs. 0.23%).

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Fund Composition

Industry Exposure

EEM vs. MDY - Industry Exposure

EEMMDY
Technology21.36%14.74%
Industrials4.61%17.88%
Energy5.17%2.52%
Communication Services11.76%1.63%
Utilities1.99%2.84%
Healthcare5.06%11.17%
Consumer Defensive5.45%4.2%
Real Estate1.98%9.66%
Financial Services18.39%15.2%
Consumer Cyclical15.16%14.89%
Basic Materials9.07%5.27%

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

EEM is 6.62% more exposed to the Technology sector than MDY (21.36% vs 14.74%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 3.19% higher and 0.27% higher respectively (18.39% vs. 15.2% and 15.16% vs. 14.89%). In total, Utilities, Industrials, and Healthcare also make up 20.23% less of the fund’s holdings compared to MDY (11.66% vs. 31.89%).

Holdings

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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%.

MDY - Holdings

MDY HoldingsWeight
Bio-Techne Corp0.75%
Molina Healthcare Inc0.63%
Cognex Corp0.63%
Fair Isaac Corp0.62%
XPO Logistics Inc0.61%
SolarEdge Technologies Inc0.61%
Signature Bank0.6%
Graco Inc0.55%
Camden Property Trust0.55%
FactSet Research Systems Inc0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

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Risk Analysis

EEMMDY
Mean Return0.381.08
R-squared83.586.66
Std. Deviation17.7916.83
Alpha-2.33-4.1
Beta1.081.15
Sharpe Ratio0.220.73
Treynor Ratio2.229.97

The iShares MSCI Emerging Markets ETF (EEM) has a Beta of 1.08 with a Treynor Ratio of 2.22 and a Sharpe Ratio of 0.22. Its Mean Return is 0.38 while EEM’s R-squared is 83.5. Furthermore, the fund has a Alpha of -2.33 and a Standard Deviation of 17.79.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Treynor Ratio of 9.97 with a Standard Deviation of 16.83 and a Mean Return of 1.08. Its Beta is 1.15 while MDY’s Sharpe Ratio is 0.73. Furthermore, the fund has a Alpha of -4.1 and a R-squared of 86.66.

EEM’s Mean Return is 0.70 points lower than that of MDY and its R-squared is 3.16 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than MDY. The Alpha and Beta of EEM are 1.77 points higher and 0.07 points lower than MDY’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. MDY - Annual Returns

YearEEMMDY
202017.56%13.51%
201917.67%25.86%
2018-14.98%-11.28%
201736.42%15.89%
201610.51%20.33%
2015-15.41%-2.4%
2014-2.82%9.42%
2013-3.14%33.08%
201217.32%17.58%
2011-18.87%-1.99%
201015.93%26.17%

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 2013 was the strongest year for MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

EEM vs. MDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$15,5785.47%
MDY$10,000$36,52413.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

EEM’s CAGR is 7.82 percentage points lower than that of MDY and as a result, would have yielded $20,946 less on a $10,000 investment. Thus, EEM performed worse than MDY by 7.82% annually.


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