When it comes to investing in international equities, two popular options are Vanguard FTSE Developed Markets ETF (VEA) and Vanguard FTSE Europe ETF (VGK).
VEA vs VGK: Both ETFs are offered by Vanguard and have similar investment objectives, but there are some key differences to consider before making your investment decision.
VEA offers exposure to developed markets outside of the United States, while VGK focuses solely on European equities. This means that VEA provides a more diverse portfolio, while VGK is more concentrated in a single region. It’s important to consider your investment goals and risk tolerance when deciding which ETF is right for you.
Another key factor to consider is the performance and returns of each ETF. While past performance is not indicative of future results, it can provide some insight into how each ETF has performed in the past. Additionally, costs and expenses, risk analysis, and other investment considerations should be taken into account when making your decision.
Key Takeaways VEA vs VGK
- VEA and VGK are both popular Vanguard ETFs that offer exposure to international equities, but have different investment objectives and portfolio compositions.
- When deciding between VEA and VGK, it’s important to consider your investment goals and risk tolerance.
- Other factors to consider include performance and returns, costs and expenses, risk analysis, and other investment considerations.
Overview of VEA vs VGK
When it comes to investing in ETFs, VEA and VGK are two popular options that investors often consider. Both VEA and VGK are ETFs that track the performance of developed markets, but they have some key differences.
Investment Strategy
VEA, or the Vanguard FTSE Developed Markets ETF, tracks the FTSE Developed All Cap ex US Index. This index includes large, mid, and small-cap stocks from developed markets outside the United States. The ETF aims to provide investors with exposure to the performance of the developed markets, excluding the United States.
On the other hand, VGK, or the Vanguard FTSE Europe ETF, tracks the FTSE Developed Europe All Cap Index. This index includes large, mid, and small-cap stocks from developed markets in Europe. The ETF aims to provide investors with exposure to the performance of developed markets in Europe.
Market Coverage VEA vs VGK
VEA and VGK have different market coverage. VEA provides investors with exposure to developed markets outside the United States, while VGK provides investors with exposure to developed markets in Europe.
VEA has a broader market coverage than VGK, as it includes stocks from developed markets in Europe, Asia, and Australia, while VGK only includes stocks from developed markets in Europe. This means that VEA may be a better option for investors who want more diversified exposure to developed markets.
In terms of fees, VEA has a lower expense ratio of 0.05% compared to VGK’s expense ratio of 0.08%. However, it is important to note that fees should not be the only factor to consider when choosing an ETF.
Overall, both VEA and VGK are popular ETFs that provide investors with exposure to developed markets. While they have some similarities, they also have some key differences in terms of investment strategy and market coverage. It is important to do your own research and consider your investment goals and risk tolerance before choosing an ETF.
Performance and Returns VEA vs VGK
Historical Performance
When comparing VEA and VGK, it’s important to look at their historical performance. Over the past 10 years, VEA has had an average annual return of 5.40%, while VGK has had an average annual return of 5.68%. This means that VGK has outperformed VEA by 0.28% per year over the past decade. However, it’s worth noting that past performance is not a guarantee of future returns.
In terms of shorter-term performance, both VEA and VGK have had positive returns over the past year. VEA has had a 1-year return of 21.32%, while VGK has had a 1-year return of 22.67%. Additionally, both funds have had positive returns over the past 3 and 5 years.
Yield and Dividends
Another important aspect to consider when comparing VEA and VGK is their yield and dividends. VEA currently has a dividend yield of 3.04%, while VGK has a slightly higher yield of 3.20%.
It’s also worth noting that VEA has a lower expense ratio than VGK, which could impact overall returns. VEA has an expense ratio of 0.05%, while VGK has an expense ratio of 0.08%.
Overall, when comparing VEA and VGK, it’s important to consider both their historical performance and their yield and dividends. While VGK has outperformed VEA over the past decade, VEA has a slightly lower expense ratio and could be a good option for investors looking for exposure to developed markets outside of Europe.
Costs and Expenses
When comparing VEA and VGK, it is important to consider the costs and expenses associated with each ETF. This section will discuss the expense ratio and tax efficiency of both funds.
Expense Ratio
The expense ratio is the annual fee that an ETF charges its investors. VEA has a lower expense ratio of 0.05% compared to VGK’s expense ratio of 0.08% (ETF.com). This means that for every $10,000 invested, VEA will charge you $5 per year, while VGK will charge you $8 per year.
It is worth noting that while VEA has a lower expense ratio, it does not necessarily mean that it is the better investment option. Other factors such as performance and holdings should also be considered.
Tax Efficiency
Tax efficiency is another important factor to consider when comparing VEA and VGK. Tax-managed funds are designed to minimize the tax impact on their investors by using strategies such as tax-loss harvesting and avoiding high turnover rates.
Both VEA and VGK are tax-managed funds, meaning they are designed with tax efficiency in mind. However, VGK has a slight advantage over VEA in terms of tax efficiency. VGK has a lower turnover rate of 3%, compared to VEA’s turnover rate of 5% (ETF Database). This means that VGK is less likely to generate capital gains, which can be taxable to investors.
In summary, when comparing VEA and VGK, it is important to consider the expense ratio and tax efficiency of each fund. While VEA has a lower expense ratio, VGK has a slight advantage in terms of tax efficiency. It is important to weigh these factors against other considerations such as performance and holdings when making an investment decision.
Risk Analysis
Volatility Metrics
When comparing VEA and VGK, it is important to consider their volatility metrics. Volatility refers to the degree of variation of an asset’s price over time. One way to measure volatility is by calculating the standard deviation of daily returns. Based on this metric, VEA has a lower volatility than VGK. VEA has a daily standard deviation of 0.82%, while VGK has a daily standard deviation of 0.89%. This means that VEA is less volatile than VGK.
Another way to measure volatility is by comparing the maximum drawdown of the two funds. Maximum drawdown is the largest percentage decline from a fund’s peak value to its subsequent trough. Based on this metric, VEA also has a lower volatility than VGK. VEA has a maximum drawdown of -22.73%, while VGK has a maximum drawdown of -27.70%. This means that VEA has experienced smaller losses than VGK during market downturns.
Risk-adjusted Returns
When comparing VEA and VGK, it is also important to consider their risk-adjusted returns. Risk-adjusted returns take into account the level of risk taken to generate a certain return. One way to measure risk-adjusted returns is by calculating the Sharpe ratio. The Sharpe ratio measures the excess return earned by a fund above the risk-free rate per unit of volatility. Based on this metric, VEA has a higher risk-adjusted return than VGK. VEA has a Sharpe ratio of 0.58, while VGK has a Sharpe ratio of 0.53. This means that VEA has generated a higher return per unit of risk taken than VGK.
Another way to measure risk-adjusted returns is by comparing the correlation of the two funds. Correlation measures the degree to which two assets move in relation to each other. Based on this metric, VEA and VGK are highly correlated, with a correlation coefficient of 0.91. This means that the two funds tend to move in the same direction, which can increase overall portfolio risk.
When comparing VEA and VGK, it is important to consider both their volatility metrics and risk-adjusted returns. While VEA has a lower volatility and higher risk-adjusted return than VGK, the two funds are highly correlated. Therefore, it is important to consider the overall diversification of your portfolio when choosing between VEA and VGK.
Investment Considerations
When considering investing in VEA and VGK, there are a few key factors to keep in mind.
Asset Allocation
VEA and VGK have different asset allocations, which may impact your investment goals. VEA invests in developed markets outside of the US, while VGK focuses on European markets. As such, VEA has a broader geographic exposure than VGK. If you are looking for exposure to a wider range of developed markets, VEA may be the better choice for you. However, if you are looking to specifically invest in European markets, VGK may be the better option.
Market Capitalization Focus
Another key difference between VEA and VGK is their market capitalization focus. VEA invests in both large and mid-cap companies, while VGK focuses on large-cap companies. This means that VEA may have more exposure to smaller companies than VGK. If you are looking for exposure to small and mid-cap companies, VEA may be the better choice. However, if you prefer to focus on large-cap companies, VGK may be the better option.
Overall, when deciding between VEA and VGK, it is important to consider your investment goals and risk tolerance. Both funds have similar expense ratios and AUM, with VEA having slightly more assets under management. Additionally, both funds invest in a similar range of securities, with VEA holding more companies than VGK. When it comes to geographic exposure, VEA has more exposure to the United Kingdom, while VGK has more exposure to France, Switzerland, and Germany.
Comparative Analysis
When comparing VEA and VGK, there are several factors to consider. Here, we’ll take a look at the performance and dividend comparisons between these two ETFs.
Performance Comparison
VEA and VGK have both performed well in the past, but past performance is not a guarantee of future results. VEA has a slightly higher total return than VGK over the past five years, with a 7.54% return compared to VGK’s 7.28%. However, VGK has outperformed VEA over the past year, with a 20.4% return compared to VEA’s 19.2%.
When considering the category of these two ETFs, VEA is an iShares product that tracks the performance of the FTSE Developed All Cap ex US Index, while VGK tracks the FTSE Developed Europe All Cap Index. This means that VEA has exposure to markets outside of the United States, while VGK is focused solely on Europe.
Dividend Comparison
Both VEA and VGK pay dividends to their investors, but VEA has a slightly higher dividend yield than VGK. As of the end of November 2023, VEA had a dividend yield of 2.67% compared to VGK’s 2.44%.
It’s also worth noting that VEA has a higher percentage of its holdings in the United States compared to VGK. As of the end of November 2023, VEA had 16.73% of its holdings in the United States, while VGK had only 1.31%. This means that VEA may be a better option for investors looking for exposure to both international and US markets.
Overall, both VEA and VGK are solid ETFs with strong performance histories and dividend payouts. When deciding between the two, it’s important to consider your investment goals and risk tolerance, as well as the specific markets and regions you want to invest in.
