EEM vs. VBK: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between EEM and VBK? And which fund is better?

The expense ratio of EEM is 0.61 percentage points higher than VBK’s (0.68% vs. 0.07%). EEM also has a lower exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than VBK over the past ten years.

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

Summary

EEM VBK
Name iShares MSCI Emerging Markets ETF Vanguard Small-Cap Growth Index Fund ETF Shares
Category Diversified Emerging Mkts Small Growth
Issuer iShares Vanguard
AUM 30.33B 37.89B
Avg. Return 5.47% 16.53%
Div. Yield 1.48% 0.45%
Expense Ratio 0.68% 0.07%

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 Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

EEM’s dividend yield is 1.03% higher than that of VBK (1.48% vs. 0.45%). Also, EEM yielded on average 11.06% less per year over the past decade (5.47% vs. 16.53%). The expense ratio of EEM is 0.61 percentage points higher than VBK’s (0.68% vs. 0.07%).

Fund Composition

Industry Exposure

EEM vs. VBK - Industry Exposure

EEM VBK
Technology 21.36% 27.87%
Industrials 4.61% 13.19%
Energy 5.17% 1.77%
Communication Services 11.76% 3.24%
Utilities 1.99% 0.32%
Healthcare 5.06% 23.24%
Consumer Defensive 5.45% 3.83%
Real Estate 1.98% 7.87%
Financial Services 18.39% 4.05%
Consumer Cyclical 15.16% 12.13%
Basic Materials 9.07% 2.49%

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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

EEM is 6.51% less exposed to the Technology sector than VBK (21.36% vs 27.87%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 14.34% higher and 3.03% higher respectively (18.39% vs. 4.05% and 15.16% vs. 12.13%). In total, Utilities, Industrials, and Healthcare also make up 25.09% less of the fund’s holdings compared to VBK (11.66% vs. 36.75%).

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%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

Risk Analysis

EEM VBK
Mean Return 0.38 1.22
R-squared 83.5 80.56
Std. Deviation 17.79 17.95
Alpha -2.33 -2.81
Beta 1.08 1.18
Sharpe Ratio 0.22 0.78
Treynor Ratio 2.22 11.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Mean Return of 1.22 with a Sharpe Ratio of 0.78 and a Treynor Ratio of 11.18. Its Alpha is -2.81 while VBK’s R-squared is 80.56. Furthermore, the fund has a Beta of 1.18 and a Standard Deviation of 17.95.

EEM’s Mean Return is 0.84 points lower than that of VBK and its R-squared is 2.94 points higher. With a Standard Deviation of 17.79, EEM is slightly less volatile than VBK. The Alpha and Beta of EEM are 0.48 points higher and 0.10 points lower than VBK’s Alpha and Beta.

Performance

Annual Returns

EEM vs. VBK - Annual Returns

Year EEM VBK
2020 17.56% 35.29%
2019 17.67% 32.75%
2018 -14.98% -5.68%
2017 36.42% 21.9%
2016 10.51% 10.74%
2015 -15.41% -2.51%
2014 -2.82% 4.02%
2013 -3.14% 38.18%
2012 17.32% 17.67%
2011 -18.87% -1.43%
2010 15.93% 30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

EEM vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EEM $10,000 $15,578 5.47%
VBK $10,000 $48,639 16.53%

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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

EEM’s CAGR is 11.06 percentage points lower than that of VBK and as a result, would have yielded $33,061 less on a $10,000 investment. Thus, EEM performed worse than VBK by 11.06% 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) 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!

2) 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!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply