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IWM vs. VGK: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between IWM and VGK? And which fund is better?

The expense ratio of IWM is 0.11 percentage points higher than VGK’s (0.19% vs. 0.08%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than VGK over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

IWMVGK
NameiShares Russell 2000 ETFVanguard FTSE Europe Index Fund ETF Shares
CategorySmall BlendEurope Stock
IssueriSharesVanguard
AUM66.48B25.7B
Avg. Return13.52%6.68%
Div. Yield0.86%2.52%
Expense Ratio0.19%0.08%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

IWM’s dividend yield is 1.66% lower than that of VGK (0.86% vs. 2.52%). Also, IWM yielded on average 6.84% more per year over the past decade (13.52% vs. 6.68%). The expense ratio of IWM is 0.11 percentage points higher than VGK’s (0.19% vs. 0.08%).

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Fund Composition

Industry Exposure

IWM vs. VGK - Industry Exposure

IWMVGK
Technology14.21%8.3%
Industrials14.78%15.58%
Energy3.74%4.3%
Communication Services3.79%5.09%
Utilities2.44%3.89%
Healthcare20.3%13.76%
Consumer Defensive3.65%11.39%
Real Estate8.59%2.57%
Financial Services13.76%15.85%
Consumer Cyclical10.99%11.6%
Basic Materials3.74%7.67%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

IWM is 6.54% more exposed to the Healthcare sector than VGK (20.3% vs 13.76%). IWM’s exposure to Industrials and Technology stocks is 0.80% lower and 5.91% higher respectively (14.78% vs. 15.58% and 14.21% vs. 8.3%). In total, Consumer Defensive, Basic Materials, and Energy also make up 12.23% less of the fund’s holdings compared to VGK (11.13% vs. 23.36%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

VGK - Holdings

VGK HoldingsWeight
Nestle SA2.82%
ASML Holding NV2.2%
Roche Holding AG2.13%
LVMH Moet Hennessy Louis Vuitton SE1.58%
Novartis AG1.55%
AstraZeneca PLC1.27%
SAP SE1.25%
Unilever PLC1.23%
Novo Nordisk A/S B1.09%
Siemens AG0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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Risk Analysis

IWMVGK
Mean Return1.120.61
R-squared77.7392.76
Std. Deviation18.8716.65
Alpha-5.120.45
Beta1.231.06
Sharpe Ratio0.680.4
Treynor Ratio9.565.12

The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a Alpha of -5.12 and a Sharpe Ratio of 0.68. Its Treynor Ratio is 9.56 while IWM’s Beta is 1.23. Furthermore, the fund has a R-squared of 77.73 and a Standard Deviation of 18.87.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Alpha of 0.45 with a Mean Return of 0.61 and a R-squared of 92.76. Its Standard Deviation is 16.65 while VGK’s Beta is 1.06. Furthermore, the fund has a Sharpe Ratio of 0.4 and a Treynor Ratio of 5.12.

IWM’s Mean Return is 0.51 points higher than that of VGK and its R-squared is 15.03 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than VGK. The Alpha and Beta of IWM are 5.57 points lower and 0.17 points higher than VGK’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. VGK - Annual Returns

YearIWMVGK
202019.89%6.5%
201925.42%24.26%
2018-11.02%-14.79%
201714.66%27.06%
201621.36%-0.59%
2015-4.33%-1.87%
20144.94%-6.56%
201338.85%24.93%
201216.39%21.01%
2011-4.19%-11.49%
201026.76%5.01%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

IWM vs. VGK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
VGK$10,000$18,3506.68%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

IWM’s CAGR is 6.84 percentage points higher than that of VGK and as a result, would have yielded $18,336 more on a $10,000 investment. Thus, IWM outperformed VGK by 6.84% annually.


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