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IWD vs. EEM: What’s The Difference?

The iShares Russell 1000 Value ETF (IWD) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between IWD and EEM? And which fund is better?

The expense ratio of IWD is 0.49 percentage points lower than EEM’s (0.19% vs. 0.68%). IWD also has a higher exposure to the financial services sector and a lower standard deviation. Overall, IWD has provided higher returns than EEM over the past ten years.

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

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Summary

IWDEEM
NameiShares Russell 1000 Value ETFiShares MSCI Emerging Markets ETF
CategoryLarge ValueDiversified Emerging Mkts
IssueriSharesiShares
AUM54.1B30.33B
Avg. Return11.40%5.47%
Div. Yield1.57%1.48%
Expense Ratio0.19%0.68%

The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.

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%.

IWD’s dividend yield is 0.09% higher than that of EEM (1.57% vs. 1.48%). Also, IWD yielded on average 5.93% more per year over the past decade (11.40% vs. 5.47%). The expense ratio of IWD is 0.49 percentage points lower than EEM’s (0.19% vs. 0.68%).

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Fund Composition

Industry Exposure

IWD vs. EEM - Industry Exposure

IWDEEM
Technology10.28%21.36%
Industrials11.77%4.61%
Energy4.76%5.17%
Communication Services8.67%11.76%
Utilities4.88%1.99%
Healthcare17.78%5.06%
Consumer Defensive7.76%5.45%
Real Estate4.94%1.98%
Financial Services20.43%18.39%
Consumer Cyclical5.62%15.16%
Basic Materials3.1%9.07%

The iShares Russell 1000 Value ETF (IWD) has the most exposure to the Financial Services sector at 20.43%. This is followed by Healthcare and Industrials at 17.78% and 11.77% respectively. Energy (4.76%), Utilities (4.88%), and Real Estate (4.94%) only make up 14.58% of the fund’s total assets.

IWD’s mid-section with moderate exposure is comprised of Consumer Cyclical, Consumer Defensive, Communication Services, Technology, and Industrials stocks at 5.62%, 7.76%, 8.67%, 10.28%, and 11.77%.

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%.

IWD is 2.04% more exposed to the Financial Services sector than EEM (20.43% vs 18.39%). IWD’s exposure to Healthcare and Industrials stocks is 12.72% higher and 7.16% higher respectively (17.78% vs. 5.06% and 11.77% vs. 4.61%). In total, Energy, Utilities, and Real Estate also make up 5.44% more of the fund’s holdings compared to EEM (14.58% vs. 9.14%).

Holdings

IWD - Holdings

IWD HoldingsWeight
Berkshire Hathaway Inc Class B2.58%
JPMorgan Chase & Co2.25%
Johnson & Johnson2.24%
UnitedHealth Group Inc1.78%
Procter & Gamble Co1.71%
The Walt Disney Co1.5%
Bank of America Corp1.43%
Comcast Corp Class A1.33%
Exxon Mobil Corp1.2%
Pfizer Inc1.18%

IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.

The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.

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%.

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Risk Analysis

IWDEEM
Mean Return1.030.38
R-squared92.3883.5
Std. Deviation14.3517.79
Alpha-3.23-2.33
Beta1.021.08
Sharpe Ratio0.810.22
Treynor Ratio11.062.22

The iShares Russell 1000 Value ETF (IWD) has a Alpha of -3.23 with a Mean Return of 1.03 and a Beta of 1.02. Its R-squared is 92.38 while IWD’s Sharpe Ratio is 0.81. Furthermore, the fund has a Treynor Ratio of 11.06 and a Standard Deviation of 14.35.

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

IWD’s Mean Return is 0.65 points higher than that of EEM and its R-squared is 8.88 points higher. With a Standard Deviation of 14.35, IWD is slightly less volatile than EEM. The Alpha and Beta of IWD are 0.90 points lower and 0.06 points lower than EEM’s Alpha and Beta.

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Performance

Annual Returns

IWD vs. EEM - Annual Returns

YearIWDEEM
20202.67%17.56%
201926.34%17.67%
2018-8.4%-14.98%
201713.47%36.42%
201617.09%10.51%
2015-3.95%-15.41%
201413.21%-2.82%
201332.18%-3.14%
201217.28%17.32%
20110.21%-18.87%
201015.3%15.93%

IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% respectively.

The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.

Portfolio Growth

IWD vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWD$10,000$30,74611.40%
EEM$10,000$15,5785.47%

A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.

With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.

IWD’s CAGR is 5.93 percentage points higher than that of EEM and as a result, would have yielded $15,168 more on a $10,000 investment. Thus, IWD outperformed EEM by 5.93% annually.


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