VEA vs. IWM: What’s The Difference?

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

The expense ratio of VEA is 0.14 percentage points lower than IWM’s (0.05% vs. 0.19%). VEA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VEA has provided lower returns than IWM over the past ten years.

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

Summary

VEA IWM
Name Vanguard FTSE Developed Markets Index Fund ETF Shares iShares Russell 2000 ETF
Category Foreign Large Blend Small Blend
Issuer Vanguard iShares
AUM 157.48B 66.48B
Avg. Return 7.05% 13.52%
Div. Yield 2.49% 0.86%
Expense Ratio 0.05% 0.19%

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 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%.

VEA’s dividend yield is 1.63% higher than that of IWM (2.49% vs. 0.86%). Also, VEA yielded on average 6.47% less per year over the past decade (7.05% vs. 13.52%). The expense ratio of VEA is 0.14 percentage points lower than IWM’s (0.05% vs. 0.19%).

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Fund Composition

Industry Exposure

VEA vs. IWM - Industry Exposure

VEA IWM
Technology 11.67% 14.21%
Industrials 15.47% 14.78%
Energy 4.17% 3.74%
Communication Services 5.41% 3.79%
Utilities 3.1% 2.44%
Healthcare 10.6% 20.3%
Consumer Defensive 8.61% 3.65%
Real Estate 4.04% 8.59%
Financial Services 17.39% 13.76%
Consumer Cyclical 11.31% 10.99%
Basic Materials 8.24% 3.74%

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 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%.

VEA is 3.63% more exposed to the Financial Services sector than IWM (17.39% vs 13.76%). VEA’s exposure to Industrials and Technology stocks is 0.69% higher and 2.54% lower respectively (15.47% vs. 14.78% and 11.67% vs. 14.21%). In total, Real Estate, Energy, and Communication Services also make up 2.50% less of the fund’s holdings compared to IWM (13.62% vs. 16.12%).

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
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%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

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%.

IWM - Holdings

IWM Holdings Weight
AMC Entertainment Holdings Inc Class A 0.52%
Intellia Therapeutics Inc 0.33%
Crocs Inc 0.3%
BlackRock Cash Funds Treasury SL Agency 0.29%
Tenet Healthcare Corp 0.26%
Lattice Semiconductor Corp 0.26%
Tetra Tech Inc 0.25%
II-VI Inc 0.25%
EastGroup Properties Inc 0.24%
Arrowhead Pharmaceuticals Inc 0.24%

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%.

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Performance

Annual Returns

VEA vs. IWM - Annual Returns

Year VEA IWM
2020 10.29% 19.89%
2019 22.08% 25.42%
2018 -14.47% -11.02%
2017 26.44% 14.66%
2016 2.51% 21.36%
2015 -0.21% -4.33%
2014 -5.71% 4.94%
2013 22.12% 38.85%
2012 18.6% 16.39%
2011 -12.57% -4.19%
2010 8.47% 26.76%

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 IWM, returning 38.85% on an annual basis. The poorest year for IWM in the last ten years was 2018, with a yield of -11.02%. Most years the iShares Russell 2000 ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 14.66%, 16.39%, and 19.89% respectively.

Portfolio Growth

VEA vs. IWM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $19,290 7.05%
IWM $10,000 $36,686 13.52%

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 IWM, the end total would have been $36,686. This equates to a $26,686 profit over 11 years and a compound annual growth rate (CAGR) of 13.52%.

VEA’s CAGR is 6.47 percentage points lower than that of IWM and as a result, would have yielded $17,396 less on a $10,000 investment. Thus, VEA performed worse than IWM by 6.47% annually.


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