IWB vs. EMB: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between IWB and EMB? And which fund is better?

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

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

Summary

IWB EMB
Name iShares Russell 1000 ETF iShares J.P. Morgan USD Emerging Markets Bond ETF
Category Large Blend Emerging Markets Bond
Issuer iShares iShares
AUM 30.54B 19.76B
Avg. Return 14.64% 6.43%
Div. Yield 1.14% 3.85%
Expense Ratio 0.15% 0.39%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 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%.

IWB’s dividend yield is 2.71% lower than that of EMB (1.14% vs. 3.85%). Also, IWB yielded on average 8.20% more per year over the past decade (14.64% vs. 6.43%). The expense ratio of IWB is 0.24 percentage points lower than EMB’s (0.15% vs. 0.39%).

Fund Composition

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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.

Risk Analysis

IWB EMB
Mean Return 1.27 0.44
R-squared 99.73 23.34
Std. Deviation 13.87 8.44
Alpha -0.38 0.89
Beta 1.02 1.36
Sharpe Ratio 1.05 0.55
Treynor Ratio 14.31 3.24

The iShares Russell 1000 ETF (IWB) has a Alpha of -0.38 with a Beta of 1.02 and a R-squared of 99.73. Its Sharpe Ratio is 1.05 while IWB’s Standard Deviation is 13.87. Furthermore, the fund has a Mean Return of 1.27 and a Treynor Ratio of 14.31.

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

IWB’s Mean Return is 0.83 points higher than that of EMB and its R-squared is 76.39 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than EMB. The Alpha and Beta of IWB are 1.27 points lower and 0.34 points lower than EMB’s Alpha and Beta.

Performance

Annual Returns

IWB vs. EMB - Annual Returns

Year IWB EMB
2020 20.8% 5.48%
2019 31.26% 15.57%
2018 -4.91% -5.67%
2017 21.53% 9.98%
2016 11.91% 9.41%
2015 0.82% 0.43%
2014 13.08% 6.69%
2013 32.93% -7.42%
2012 16.27% 17.64%
2011 1.36% 7.2%
2010 15.94% 11.47%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% respectively.

The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

IWB vs. EMB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $42,462 14.64%
EMB $10,000 $19,295 6.43%

A $10,000 investment in IWB would have resulted in a final balance of $42,462. This is a profit of $32,462 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.

IWB’s CAGR is 8.20 percentage points higher than that of EMB and as a result, would have yielded $23,167 more on a $10,000 investment. Thus, IWB outperformed EMB by 8.20% annually.


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