The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and USMV is a iShares Large Blend fund. So, what’s the difference between VEA and USMV? And which fund is better?
The expense ratio of VEA is 0.10 percentage points lower than USMV’s (0.05% vs. 0.15%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided lower returns than USMV over the past ten years.
In this article, we’ll compare VEA vs. USMV. We’ll look at performance and holdings, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VEA’s and USMV’s fund composition, annual returns, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares MSCI USA Min Vol Factor ETF|
|Category||Foreign Large Blend||Large 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 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%.
VEA’s dividend yield is 0.99% higher than that of USMV (2.49% vs. 1.5%). Also, VEA yielded on average 6.84% less per year over the past decade (7.05% vs. 13.89%). The expense ratio of VEA is 0.10 percentage points lower than USMV’s (0.05% vs. 0.15%).
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 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%.
VEA is 7.74% more exposed to the Financial Services sector than USMV (17.39% vs 9.65%). VEA’s exposure to Industrials and Technology stocks is 4.96% higher and 8.86% lower respectively (15.47% vs. 10.51% and 11.67% vs. 20.53%). In total, Real Estate, Energy, and Communication Services also make up 0.35% less of the fund’s holdings compared to USMV (13.62% vs. 13.97%).
|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%.
|Eli Lilly and Co||1.64%|
|T-Mobile US Inc||1.51%|
|Accenture PLC Class A||1.51%|
|Visa Inc Class A||1.49%|
|Waste Management 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%.
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $17,150. This is a profit of $7,150 over 8 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.
VEA’s CAGR is 6.84 percentage points lower than that of USMV and as a result, would have yielded $10,457 less on a $10,000 investment. Thus, VEA performed worse than USMV by 6.84% annually.
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