EMB vs. MTUM: What’s The Difference?

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between EMB and MTUM? And which fund is better?

The expense ratio of EMB is 0.24 percentage points higher than MTUM’s (0.39% vs. 0.15%). EMB is mostly comprised of BBB bonds while MTUM has a high exposure to the financial services sector. Overall, EMB has provided lower returns than MTUM over the past 7 years.

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

Summary

EMB MTUM
Name iShares J.P. Morgan USD Emerging Markets Bond ETF iShares MSCI USA Momentum Factor ETF
Category Emerging Markets Bond Large Growth
Issuer iShares iShares
AUM 19.76B 14.53B
Avg. Return 6.43% 17.37%
Div. Yield 3.85% 0.44%
Expense Ratio 0.39% 0.15%

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

The iShares MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

EMB’s dividend yield is 3.41% higher than that of MTUM (3.85% vs. 0.44%). Also, EMB yielded on average 10.93% less per year over the past decade (6.43% vs. 17.37%). The expense ratio of EMB is 0.24 percentage points higher than MTUM’s (0.39% vs. 0.15%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

EMB MTUM
Mean Return 0.44 0
R-squared 23.34 0
Std. Deviation 8.44 0
Alpha 0.89 0
Beta 1.36 0
Sharpe Ratio 0.55 0
Treynor Ratio 3.24 0

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a R-squared of 23.34 with a Beta of 1.36 and a Alpha of 0.89. Its Treynor Ratio is 3.24 while EMB’s Sharpe Ratio is 0.55. Furthermore, the fund has a Standard Deviation of 8.44 and a Mean Return of 0.44.

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Alpha of 0 with a R-squared of 0 and a Beta of 0. Its Sharpe Ratio is 0 while MTUM’s Treynor Ratio is 0. Furthermore, the fund has a Mean Return of 0 and a Standard Deviation of 0.

EMB’s Mean Return is 0.44 points higher than that of MTUM and its R-squared is 23.34 points higher. With a Standard Deviation of 8.44, EMB is slightly more volatile than MTUM. The Alpha and Beta of EMB are 0.89 points higher and 1.36 points higher than MTUM’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

EMB vs. MTUM - Annual Returns

Year EMB MTUM
2020 5.48% 29.69%
2019 15.57% 27.57%
2018 -5.67% -1.77%
2017 9.98% 37.6%
2016 9.41% 4.89%
2015 0.43% 9.12%
2014 6.69% 14.48%
2013 -7.42% 0.0%
2012 17.64% 0.0%
2011 7.2% 0.0%
2010 11.47% 0.0%

EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% respectively.

The year 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

EMB vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EMB $10,000 $14,825 6.43%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in EMB would have resulted in a final balance of $14,825. This is a profit of $4,825 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.43%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

EMB’s CAGR is 10.93 percentage points lower than that of MTUM and as a result, would have yielded $14,476 less on a $10,000 investment. Thus, EMB performed worse than MTUM by 10.93% 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 Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

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

Leave a Reply