The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VEU and EEM? And which fund is better?
The expense ratio of VEU is 0.60 percentage points lower than EEM’s (0.08% vs. 0.68%). VEU also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VEU has provided higher returns than EEM over the past ten years.
In this article, we’ll compare VEU vs. EEM. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and holdings. Moreover, I’ll also discuss VEU’s and EEM’s performance, fund composition, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard FTSE All-World ex-US Index Fund ETF Shares||iShares MSCI Emerging Markets ETF|
|Category||Foreign Large Blend||Diversified Emerging Mkts|
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
VEU’s dividend yield is 0.83% higher than that of EEM (2.31% vs. 1.48%). Also, VEU yielded on average 1.17% more per year over the past decade (6.64% vs. 5.47%). The expense ratio of VEU is 0.60 percentage points lower than EEM’s (0.08% vs. 0.68%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.
VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
VEU is 0.07% more exposed to the Financial Services sector than EEM (18.46% vs 18.39%). VEU’s exposure to Technology and Consumer Cyclical stocks is 8.42% lower and 2.59% lower respectively (12.94% vs. 21.36% and 12.57% vs. 15.16%). In total, Real Estate, Energy, and Communication Services also make up 3.74% less of the fund’s holdings compared to EEM (15.17% vs. 18.91%).
|Tencent Holdings Ltd||1.57%|
|Alibaba Group Holding Ltd Ordinary Shares||1.4%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.98%|
|ASML Holding NV||0.95%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||0.91%|
|Roche Holding AG||0.91%|
|Toyota Motor Corp||0.75%|
|LVMH Moet Hennessy Louis Vuitton SE||0.68%|
VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.
Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Beta of 0.99 and a Standard Deviation of 15.08. Its Mean Return is 0.56 while VEU’s Treynor Ratio is 5.12. Furthermore, the fund has a Alpha of 0.28 and a Sharpe Ratio of 0.4.
The iShares MSCI Emerging Markets ETF (EEM) has a Sharpe Ratio of 0.22 with a Mean Return of 0.38 and a Beta of 1.08. Its R-squared is 83.5 while EEM’s Alpha is -2.33. Furthermore, the fund has a Treynor Ratio of 2.22 and a Standard Deviation of 17.79.
VEU’s Mean Return is 0.18 points higher than that of EEM and its R-squared is 14.94 points higher. With a Standard Deviation of 15.08, VEU is slightly less volatile than EEM. The Alpha and Beta of VEU are 2.61 points higher and 0.09 points lower than EEM’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% respectively.
The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.
VEU’s CAGR is 1.17 percentage points higher than that of EEM and as a result, would have yielded $2,929 more on a $10,000 investment. Thus, VEU outperformed EEM by 1.17% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.