The iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between IEMG and VCSH? And which fund is better?
The expense ratio of IEMG is 0.06 percentage points higher than VCSH’s (0.11% vs. 0.05%). IEMG also has a high exposure to the technology sector while VCSH is mostly comprised of BBB bonds. Overall, IEMG has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare IEMG vs. VCSH. We’ll look at fund composition and industry exposure, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss IEMG’s and VCSH’s annual returns, holdings, and performance and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||Vanguard Short-Term Corporate Bond Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Short-Term 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 Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.05%.
IEMG’s dividend yield is 0.11% lower than that of VCSH (1.78% vs. 1.89%). Also, IEMG yielded on average 4.29% more per year over the past decade (7.41% vs. 3.12%). The expense ratio of IEMG is 0.06 percentage points higher than VCSH’s (0.11% vs. 0.05%).
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|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%.
|VCSH Bond Sectors||Weight|
VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.
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The iShares Core MSCI Emerging Markets ETF (IEMG) has a Alpha of 0 with a Standard Deviation of 0 and a Treynor Ratio of 0. Its R-squared is 0 while IEMG’s Mean Return is 0. Furthermore, the fund has a Beta of 0 and a Sharpe Ratio of 0.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Sharpe Ratio of 0.97 with a Alpha of 0.93 and a Mean Return of 0.24. Its Beta is 0.48 while VCSH’s Treynor Ratio is 4.75. Furthermore, the fund has a R-squared of 37.53 and a Standard Deviation of 2.34.
IEMG’s Mean Return is 0.24 points lower than that of VCSH and its R-squared is 37.53 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VCSH. The Alpha and Beta of IEMG are 0.93 points lower and 0.48 points lower than VCSH’s Alpha and Beta.
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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 VCSH, returning 6.85% on an annual basis. The poorest year for VCSH in the last ten years was 2018, with a yield of 0.91%. Most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 2.45%, 2.63%, and 2.94% 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 VCSH, the end total would have been $12,298. This equates to a $2,298 profit over 7 years and a compound annual growth rate (CAGR) of 3.12%.
IEMG’s CAGR is 4.29 percentage points higher than that of VCSH and as a result, would have yielded $2,739 more on a $10,000 investment. Thus, IEMG outperformed VCSH by 4.29% annually.
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