The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Vanguard Growth Index Fund ETF Shares (VUG) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and VUG is a Vanguard Large Growth fund. So, what’s the difference between VEA and VUG? And which fund is better?
The expense ratio of VEA is 0.01 percentage points higher than VUG’s (0.05% vs. 0.04%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided lower returns than VUG over the past ten years.
In this article, we’ll compare VEA vs. VUG. We’ll look at risk metrics and portfolio growth, as well as at their performance and fund composition. Moreover, I’ll also discuss VEA’s and VUG’s industry exposure, annual returns, and holdings and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||Vanguard Growth Index Fund ETF Shares|
|Category||Foreign Large Blend||Large Growth|
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 Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
VEA’s dividend yield is 1.92% higher than that of VUG (2.49% vs. 0.57%). Also, VEA yielded on average 10.53% less per year over the past decade (7.05% vs. 17.58%). The expense ratio of VEA is 0.01 percentage points higher than VUG’s (0.05% vs. 0.04%).
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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 Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.
VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.
VEA is 10.64% more exposed to the Financial Services sector than VUG (17.39% vs 6.75%). VEA’s exposure to Industrials and Technology stocks is 10.34% higher and 27.38% lower respectively (15.47% vs. 5.13% and 11.67% vs. 39.05%). In total, Real Estate, Energy, and Communication Services also make up 5.65% less of the fund’s holdings compared to VUG (13.62% vs. 19.27%).
|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%.
|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
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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 2020 was the strongest year for VUG, returning 40.16% on an annual basis. The poorest year for VUG in the last ten years was 2018, with a yield of -3.32%. Most years the Vanguard Growth Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.62%, 17.03%, and 17.11% 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 VUG, the end total would have been $54,735. This equates to a $44,735 profit over 11 years and a compound annual growth rate (CAGR) of 17.58%.
VEA’s CAGR is 10.53 percentage points lower than that of VUG and as a result, would have yielded $35,445 less on a $10,000 investment. Thus, VEA performed worse than VUG by 10.53% annually.
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