The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Total World Stock Index Fund ETF Shares (VT) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and VT is a Vanguard N/A fund. So, what’s the difference between EEM and VT? And which fund is better?
The expense ratio of EEM is 0.60 percentage points higher than VT’s (0.68% vs. 0.08%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than VT over the past ten years.
In this article, we’ll compare EEM vs. VT. We’ll look at portfolio growth and risk metrics, as well as at their performance and holdings. Moreover, I’ll also discuss EEM’s and VT’s fund composition, annual returns, and industry exposure and examine how these affect their overall returns.
Summary
| EEM | VT | |
| NameiShares MSCI Emerging Markets ETFVanguard Total World Stock Index Fund ETF Shares | ||
| Category | Diversified Emerging Mkts | N/A |
| Issuer | iShares | Vanguard |
| AUM | 30.33B | 30.44B |
| Avg. Return | 5.47% | 10.42% |
| Div. Yield | 1.48% | 1.65% |
| Expense Ratio | 0.68% | 0.08% |
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 Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.
EEM’s dividend yield is 0.17% lower than that of VT (1.48% vs. 1.65%). Also, EEM yielded on average 4.94% less per year over the past decade (5.47% vs. 10.42%). The expense ratio of EEM is 0.60 percentage points higher than VT’s (0.68% vs. 0.08%).
Fund Composition
Industry Exposure
| EEM | VT | |
| Technology | 21.36% | 19.63% |
| Industrials | 4.61% | 10.7% |
| Energy | 5.17% | 3.48% |
| Communication Services | 11.76% | 9.02% |
| Utilities | 1.99% | 2.6% |
| Healthcare | 5.06% | 11.58% |
| Consumer Defensive | 5.45% | 6.71% |
| Real Estate | 1.98% | 3.64% |
| Financial Services | 18.39% | 15.36% |
| Consumer Cyclical | 15.16% | 12.32% |
| Basic Materials | 9.07% | 4.97% |
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 Total World Stock Index Fund ETF Shares (VT) has the most exposure to the Technology sector at 19.63%. This is followed by Financial Services and Consumer Cyclical at 15.36% and 12.32% respectively. Energy (3.48%), Real Estate (3.64%), and Basic Materials (4.97%) only make up 12.09% of the fund’s total assets.
VT’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Industrials, Healthcare, and Consumer Cyclical stocks at 6.71%, 9.02%, 10.7%, 11.58%, and 12.32%.
EEM is 1.73% more exposed to the Technology sector than VT (21.36% vs 19.63%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 3.03% higher and 2.84% higher respectively (18.39% vs. 15.36% and 15.16% vs. 12.32%). In total, Utilities, Industrials, and Healthcare also make up 13.22% less of the fund’s holdings compared to VT (11.66% vs. 24.88%).
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%.
| VT Holdings | Weight |
| Apple Inc | 2.85% |
| Microsoft Corp | 2.71% |
| Amazon.com Inc | 1.98% |
| Facebook Inc Class A | 1.1% |
| Alphabet Inc Class A | 0.97% |
| Alphabet Inc Class C | 0.95% |
| Tesla Inc | 0.7% |
| NVIDIA Corp | 0.64% |
| JPMorgan Chase & Co | 0.62% |
| Tencent Holdings Ltd | 0.6% |
VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.
Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.
Risk Analysis
| EEM | VT | |
| Mean Return | 0.38 | 0.9 |
| R-squared | 83.5 | 99.35 |
| Std. Deviation | 17.79 | 14.19 |
| Alpha | -2.33 | 0.2 |
| Beta | 1.08 | 1.01 |
| Sharpe Ratio | 0.22 | 0.71 |
| Treynor Ratio | 2.22 | 9.5 |
The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a R-squared of 83.5 and a Mean Return of 0.38. Its Standard Deviation is 17.79 while EEM’s Sharpe Ratio is 0.22. Furthermore, the fund has a Alpha of -2.33 and a Beta of 1.08.
The Vanguard Total World Stock Index Fund ETF Shares (VT) has a Standard Deviation of 14.19 with a Alpha of 0.2 and a Sharpe Ratio of 0.71. Its R-squared is 99.35 while VT’s Treynor Ratio is 9.5. Furthermore, the fund has a Beta of 1.01 and a Mean Return of 0.9.
EEM’s Mean Return is 0.52 points lower than that of VT and its R-squared is 15.85 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than VT. The Alpha and Beta of EEM are 2.53 points lower and 0.07 points higher than VT’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | VT |
| 2020 | 17.56% | 16.74% |
| 2019 | 17.67% | 26.8% |
| 2018 | -14.98% | -9.67% |
| 2017 | 36.42% | 24.19% |
| 2016 | 10.51% | 8.77% |
| 2015 | -15.41% | -1.88% |
| 2014 | -2.82% | 3.97% |
| 2013 | -3.14% | 22.98% |
| 2012 | 17.32% | 17.33% |
| 2011 | -18.87% | -7.71% |
| 2010 | 15.93% | 13.05% |
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 2019 was the strongest year for VT, returning 26.8% on an annual basis. The poorest year for VT in the last ten years was 2018, with a yield of -9.67%. Most years the Vanguard Total World Stock Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 8.77%, 13.05%, and 16.74% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| VT | $10,000 | $27,739 | 10.42% |
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 VT, the end total would have been $27,739. This equates to a $17,739 profit over 11 years and a compound annual growth rate (CAGR) of 10.42%.
EEM’s CAGR is 4.94 percentage points lower than that of VT and as a result, would have yielded $12,161 less on a $10,000 investment. Thus, EEM performed worse than VT by 4.94% 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.
