The iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between IEMG and VCIT? And which fund is better?
The expense ratio of IEMG is 0.06 percentage points higher than VCIT’s (0.11% vs. 0.05%). IEMG also has a high exposure to the technology sector while VCIT is mostly comprised of BBB bonds. Overall, IEMG has provided higher returns than VCIT over the past ten years.
In this article, we’ll compare IEMG vs. VCIT. We’ll look at industry exposure and risk metrics, as well as at their performance and fund composition. Moreover, I’ll also discuss IEMG’s and VCIT’s holdings, annual returns, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Corporate Bond|
The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
IEMG’s dividend yield is 0.55% lower than that of VCIT (1.78% vs. 2.33%). Also, IEMG yielded on average 1.57% more per year over the past decade (7.41% vs. 5.84%). The expense ratio of IEMG is 0.06 percentage points higher than VCIT’s (0.11% vs. 0.05%).
|Taiwan Semiconductor Manufacturing Co Ltd||5.37%|
|Tencent Holdings Ltd||4.42%|
|Alibaba Group Holding Ltd Ordinary Shares||4.38%|
|Samsung Electronics Co Ltd||3.49%|
|Naspers Ltd Class N||0.93%|
|Reliance Industries Ltd Shs Dematerialised||0.83%|
|China Construction Bank Corp Class H||0.77%|
IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.
Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Treynor Ratio of 0 with a Standard Deviation of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while IEMG’s Beta is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Beta of 1.35 with a R-squared of 63.18 and a Mean Return of 0.44. Its Standard Deviation is 5.08 while VCIT’s Alpha is 0.89. Furthermore, the fund has a Sharpe Ratio of 0.91 and a Treynor Ratio of 3.43.
IEMG’s Mean Return is 0.44 points lower than that of VCIT and its R-squared is 63.18 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VCIT. The Alpha and Beta of IEMG are 0.89 points lower and 1.35 points lower than VCIT’s Alpha and Beta.
IEMG had its best year in 2017 with an annual return of 36.78%. IEMG’s worst year over the past decade yielded -14.69% and occurred in 2018. In most years the iShares Core MSCI Emerging Markets ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% respectively.
The year 2019 was the strongest year for VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IEMG would have resulted in a final balance of $15,037. This is a profit of $5,037 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.41%.
With a $10,000 investment in VCIT, the end total would have been $14,774. This equates to a $4,774 profit over 7 years and a compound annual growth rate (CAGR) of 5.84%.
IEMG’s CAGR is 1.57 percentage points higher than that of VCIT and as a result, would have yielded $263 more on a $10,000 investment. Thus, IEMG outperformed VCIT by 1.57% annually.
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