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EEM vs. TLT: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and TLT is a iShares Long Government fund. So, what’s the difference between EEM and TLT? And which fund is better?

The expense ratio of EEM is 0.53 percentage points higher than TLT’s (0.68% vs. 0.15%). EEM also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, EEM has provided lower returns than TLT over the past ten years.

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

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Summary

EEMTLT
NameiShares MSCI Emerging Markets ETFiShares 20+ Year Treasury Bond ETF
CategoryDiversified Emerging MktsLong Government
IssueriSharesiShares
AUM30.33B15.15B
Avg. Return5.47%9.00%
Div. Yield1.48%1.5%
Expense Ratio0.68%0.15%

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 iShares 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

EEM’s dividend yield is 0.02% lower than that of TLT (1.48% vs. 1.5%). Also, EEM yielded on average 3.52% less per year over the past decade (5.47% vs. 9.00%). The expense ratio of EEM is 0.53 percentage points higher than TLT’s (0.68% vs. 0.15%).

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Fund Composition

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%.

TLT - Holdings

TLT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

EEMTLT
Mean Return0.380.63
R-squared83.568.76
Std. Deviation17.7912.76
Alpha-2.33-2.83
Beta1.083.54
Sharpe Ratio0.220.55
Treynor Ratio2.221.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Sharpe Ratio of 0.55 with a R-squared of 68.76 and a Alpha of -2.83. Its Treynor Ratio is 1.82 while TLT’s Mean Return is 0.63. Furthermore, the fund has a Beta of 3.54 and a Standard Deviation of 12.76.

EEM’s Mean Return is 0.25 points lower than that of TLT and its R-squared is 14.74 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than TLT. The Alpha and Beta of EEM are 0.50 points higher and 2.46 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. TLT - Annual Returns

YearEEMTLT
202017.56%17.92%
201917.67%14.93%
2018-14.98%-2.07%
201736.42%8.92%
201610.51%1.36%
2015-15.41%-1.65%
2014-2.82%27.35%
2013-3.14%-13.91%
201217.32%3.25%
2011-18.87%33.6%
201015.93%9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

EEM vs. TLT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$15,5785.47%
TLT$10,000$23,8099.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

EEM’s CAGR is 3.52 percentage points lower than that of TLT and as a result, would have yielded $8,231 less on a $10,000 investment. Thus, EEM performed worse than TLT by 3.52% annually.


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