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EEM vs. VXF: What’s The Difference?

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

Introduction To Mutual Funds
Introduction To Mutual Funds

The expense ratio of EEM is 0.62 percentage points higher than VXF’s (0.68% vs. 0.06%). EEM also has a lower exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than VXF over the past ten years.

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

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Summary

EEMVXF
NameiShares MSCI Emerging Markets ETFVanguard Extended Market Index Fund ETF Shares
CategoryDiversified Emerging MktsMid-Cap Growth
IssueriSharesVanguard
AUM30.33B114.53B
Avg. Return5.47%15.47%
Div. Yield1.48%1.19%
Expense Ratio0.68%0.06%

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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.

EEM’s dividend yield is 0.29% higher than that of VXF (1.48% vs. 1.19%). Also, EEM yielded on average 10.00% less per year over the past decade (5.47% vs. 15.47%). The expense ratio of EEM is 0.62 percentage points higher than VXF’s (0.68% vs. 0.06%).

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Fund Composition

Industry Exposure

EEM vs. VXF - Industry Exposure

EEMVXF
Technology21.36%23.61%
Industrials4.61%11.31%
Energy5.17%2.46%
Communication Services11.76%7.29%
Utilities1.99%1.65%
Healthcare5.06%15.25%
Consumer Defensive5.45%3.09%
Real Estate1.98%8.16%
Financial Services18.39%12.56%
Consumer Cyclical15.16%11.35%
Basic Materials9.07%3.26%

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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.

VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.

EEM is 2.25% less exposed to the Technology sector than VXF (21.36% vs 23.61%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 5.83% higher and 3.81% higher respectively (18.39% vs. 12.56% and 15.16% vs. 11.35%). In total, Utilities, Industrials, and Healthcare also make up 16.55% less of the fund’s holdings compared to VXF (11.66% vs. 28.21%).

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%.

VXF - Holdings

VXF HoldingsWeight
Square Inc A1.2%
Zoom Video Communications Inc1.04%
Uber Technologies Inc0.93%
Moderna Inc0.9%
Blackstone Group Inc0.83%
Snap Inc Class A0.8%
Twilio Inc A0.73%
DocuSign Inc0.68%
CrowdStrike Holdings Inc Class A0.63%
Marvell Technology Inc0.6%

VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.

Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.

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Risk Analysis

EEMVXF
Mean Return0.381.24
R-squared83.585.73
Std. Deviation17.7918.04
Alpha-2.33-3.26
Beta1.081.23
Sharpe Ratio0.220.79
Treynor Ratio2.2210.92

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

The Vanguard Extended Market Index Fund ETF Shares (VXF) has a Beta of 1.23 with a Treynor Ratio of 10.92 and a Mean Return of 1.24. Its Sharpe Ratio is 0.79 while VXF’s Standard Deviation is 18.04. Furthermore, the fund has a Alpha of -3.26 and a R-squared of 85.73.

EEM’s Mean Return is 0.86 points lower than that of VXF and its R-squared is 2.23 points lower. With a Standard Deviation of 17.79, EEM is slightly less volatile than VXF. The Alpha and Beta of EEM are 0.93 points higher and 0.15 points lower than VXF’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. VXF - Annual Returns

YearEEMVXF
202017.56%32.19%
201917.67%28.04%
2018-14.98%-9.37%
201736.42%18.1%
201610.51%16.16%
2015-15.41%-3.26%
2014-2.82%7.55%
2013-3.14%38.37%
201217.32%18.48%
2011-18.87%-3.61%
201015.93%27.55%

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 2013 was the strongest year for VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.

Portfolio Growth

EEM vs. VXF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$15,5785.47%
VXF$10,000$44,13015.47%

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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.

EEM’s CAGR is 10.00 percentage points lower than that of VXF and as a result, would have yielded $28,552 less on a $10,000 investment. Thus, EEM performed worse than VXF by 10.00% annually.


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