The iShares MSCI USA Min Vol Factor ETF (USMV) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between USMV and VGK? And which fund is better?
The expense ratio of USMV is 0.07 percentage points higher than VGK’s (0.15% vs. 0.08%). USMV also has a higher exposure to the technology sector and a lower standard deviation. Overall, USMV has provided higher returns than VGK over the past 8 years.
In this article, we’ll compare USMV vs. VGK. We’ll look at annual returns and industry exposure, as well as at their portfolio growth and performance. Moreover, I’ll also discuss USMV’s and VGK’s risk metrics, holdings, and fund composition and examine how these affect their overall returns.
Summary
| USMV | VGK | |
| Name | iShares MSCI USA Min Vol Factor ETF | Vanguard FTSE Europe Index Fund ETF Shares |
| Category | Large Blend | Europe Stock |
| Issuer | iShares | Vanguard |
| AUM | 27.6B | 25.7B |
| Avg. Return | 13.89% | 6.68% |
| Div. Yield | 1.5% | 2.52% |
| Expense Ratio | 0.15% | 0.08% |
The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
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%.
USMV’s dividend yield is 1.02% lower than that of VGK (1.5% vs. 2.52%). Also, USMV yielded on average 7.21% more per year over the past decade (13.89% vs. 6.68%). The expense ratio of USMV is 0.07 percentage points higher than VGK’s (0.15% vs. 0.08%).
Fund Composition
Industry Exposure
| USMV | VGK | |
| Technology | 20.53% | 8.3% |
| Industrials | 10.51% | 15.58% |
| Energy | 0.21% | 4.3% |
| Communication Services | 11.03% | 5.09% |
| Utilities | 6.93% | 3.89% |
| Healthcare | 18.42% | 13.76% |
| Consumer Defensive | 12.82% | 11.39% |
| Real Estate | 2.73% | 2.57% |
| Financial Services | 9.65% | 15.85% |
| Consumer Cyclical | 5.53% | 11.6% |
| Basic Materials | 1.65% | 7.67% |
The iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.
USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.
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%.
USMV is 12.23% more exposed to the Technology sector than VGK (20.53% vs 8.3%). USMV’s exposure to Healthcare and Consumer Defensive stocks is 4.66% higher and 1.43% higher respectively (18.42% vs. 13.76% and 12.82% vs. 11.39%). In total, Basic Materials, Real Estate, and Consumer Cyclical also make up 11.93% less of the fund’s holdings compared to VGK (9.91% vs. 21.84%).
Holdings
| USMV Holdings | Weight |
| Eli Lilly and Co | 1.64% |
| Microsoft Corp | 1.62% |
| T-Mobile US Inc | 1.51% |
| Accenture PLC Class A | 1.51% |
| Visa Inc Class A | 1.49% |
| Waste Management Inc | 1.45% |
| Adobe Inc | 1.45% |
| The Kroger Co | 1.44% |
| Johnson & Johnson | 1.42% |
| Gilead Sciences Inc | 1.42% |
USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.
Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.
| VGK Holdings | Weight |
| Nestle SA | 2.82% |
| ASML Holding NV | 2.2% |
| Roche Holding AG | 2.13% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.58% |
| Novartis AG | 1.55% |
| AstraZeneca PLC | 1.27% |
| SAP SE | 1.25% |
| Unilever PLC | 1.23% |
| Novo Nordisk A/S B | 1.09% |
| Siemens AG | 0.96% |
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%.
Risk Analysis
| USMV | VGK | |
| Mean Return | 0 | 0.61 |
| R-squared | 0 | 92.76 |
| Std. Deviation | 0 | 16.65 |
| Alpha | 0 | 0.45 |
| Beta | 0 | 1.06 |
| Sharpe Ratio | 0 | 0.4 |
| Treynor Ratio | 0 | 5.12 |
The iShares MSCI USA Min Vol Factor ETF (USMV) has a Sharpe Ratio of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Alpha is 0 while USMV’s Beta is 0. Furthermore, the fund has a Mean Return of 0 and a Standard Deviation of 0.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Treynor Ratio of 5.12 with a Standard Deviation of 16.65 and a Sharpe Ratio of 0.4. Its R-squared is 92.76 while VGK’s Beta is 1.06. Furthermore, the fund has a Mean Return of 0.61 and a Alpha of 0.45.
USMV’s Mean Return is 0.61 points lower than that of VGK and its R-squared is 92.76 points lower. With a Standard Deviation of 0, USMV is slightly less volatile than VGK. The Alpha and Beta of USMV are 0.45 points lower and 1.06 points lower than VGK’s Alpha and Beta.
Performance
Annual Returns
| Year | USMV | VGK |
| 2020 | 5.6% | 6.5% |
| 2019 | 27.77% | 24.26% |
| 2018 | 1.36% | -14.79% |
| 2017 | 18.97% | 27.06% |
| 2016 | 10.5% | -0.59% |
| 2015 | 5.5% | -1.87% |
| 2014 | 16.34% | -6.56% |
| 2013 | 25.11% | 24.93% |
| 2012 | 11.04% | 21.01% |
| 2011 | 0.0% | -11.49% |
| 2010 | 0.0% | 5.01% |
USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% 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
| Fund | Initial Balance | Final Balance | CAGR |
| USMV | $10,000 | $27,607 | 13.89% |
| VGK | $10,000 | $16,315 | 6.68% |
A $10,000 investment in USMV would have resulted in a final balance of $27,607. This is a profit of $17,607 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.89%.
With a $10,000 investment in VGK, the end total would have been $16,315. This equates to a $6,315 profit over 8 years and a compound annual growth rate (CAGR) of 6.68%.
USMV’s CAGR is 7.21 percentage points higher than that of VGK and as a result, would have yielded $11,292 more on a $10,000 investment. Thus, USMV outperformed VGK by 7.21% annually.
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