The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares Core S&P Small-Cap ETF (IJR) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and IJR is a iShares Small Blend fund. So, what’s the difference between VEA and IJR? And which fund is better?
The expense ratio of VEA is 0.01 percentage points lower than IJR’s (0.05% vs. 0.06%). VEA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VEA has provided lower returns than IJR over the past ten years.
In this article, we’ll compare VEA vs. IJR. We’ll look at annual returns and risk metrics, as well as at their portfolio growth and performance. Moreover, I’ll also discuss VEA’s and IJR’s holdings, fund composition, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares Core S&P Small-Cap ETF|
|Category||Foreign Large Blend||Small Blend|
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 0.05%.
The iShares Core S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.
VEA’s dividend yield is 1.53% higher than that of IJR (2.49% vs. 0.96%). Also, VEA yielded on average 6.92% less per year over the past decade (7.05% vs. 13.97%). The expense ratio of VEA is 0.01 percentage points lower than IJR’s (0.05% vs. 0.06%).
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.
VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.
The iShares Core S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.
IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.
VEA is 1.48% more exposed to the Financial Services sector than IJR (17.39% vs 15.91%). VEA’s exposure to Industrials and Technology stocks is 1.84% lower and 2.65% lower respectively (15.47% vs. 17.31% and 11.67% vs. 14.32%). In total, Real Estate, Energy, and Communication Services also make up 2.52% less of the fund’s holdings compared to IJR (13.62% vs. 16.14%).
|Samsung Electronics Co Ltd||1.4%|
|ASML Holding NV||1.16%|
|Roche Holding AG||1.1%|
|Toyota Motor Corp||0.92%|
|LVMH Moet Hennessy Louis Vuitton SE||0.84%|
|Shopify Inc A||0.7%|
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
|BlackRock Cash Funds Treasury SL Agency||1.08%|
|GameStop Corp Class A||0.86%|
|Power Integrations Inc||0.57%|
|Chart Industries Inc||0.53%|
IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.
Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.
VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% respectively.
The year 2013 was the strongest year for IJR, returning 41.36% on an annual basis. The poorest year for IJR in the last ten years was 2018, with a yield of -8.43%. Most years the iShares Core S&P Small-Cap ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 11.24%, 13.2%, and 16.28% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in IJR, the end total would have been $38,800. This equates to a $28,800 profit over 11 years and a compound annual growth rate (CAGR) of 13.97%.
VEA’s CAGR is 6.92 percentage points lower than that of IJR and as a result, would have yielded $19,510 less on a $10,000 investment. Thus, VEA performed worse than IJR by 6.92% annually.
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