The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VGT and EMB? And which fund is better?
The expense ratio of VGT is 0.29 percentage points lower than EMB’s (0.1% vs. 0.39%). VGT also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, VGT has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VGT vs. EMB. We’ll look at fund composition and portfolio growth, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VGT’s and EMB’s performance, holdings, and risk metrics and examine how these affect their overall returns.
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Summary
| VGT | EMB | |
| Name | Vanguard Information Technology Index Fund ETF Shares | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Technology | Emerging Markets Bond |
| Issuer | Vanguard | iShares |
| AUM | 54.13B | 19.76B |
| Avg. Return | 20.84% | 6.43% |
| Div. Yield | 0.66% | 3.85% |
| Expense Ratio | 0.1% | 0.39% |
The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
VGT’s dividend yield is 3.19% lower than that of EMB (0.66% vs. 3.85%). Also, VGT yielded on average 14.40% more per year over the past decade (20.84% vs. 6.43%). The expense ratio of VGT is 0.29 percentage points lower than EMB’s (0.1% vs. 0.39%).
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Fund Composition
Holdings
| VGT Holdings | Weight |
| Apple Inc | 19.58% |
| Microsoft Corp | 16.53% |
| NVIDIA Corp | 4.22% |
| Visa Inc Class A | 3.16% |
| PayPal Holdings Inc | 2.76% |
| Mastercard Inc Class A | 2.76% |
| Adobe Inc | 2.39% |
| Intel Corp | 1.94% |
| Salesforce.com Inc | 1.91% |
| Cisco Systems Inc | 1.9% |
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
Risk Analysis
| VGT | EMB | |
| Mean Return | 1.76 | 0.44 |
| R-squared | 74.84 | 23.34 |
| Std. Deviation | 16.61 | 8.44 |
| Alpha | 10.41 | 0.89 |
| Beta | 1.02 | 1.36 |
| Sharpe Ratio | 1.23 | 0.55 |
| Treynor Ratio | 20.55 | 3.24 |
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Sharpe Ratio of 1.23 with a Alpha of 10.41 and a R-squared of 74.84. Its Treynor Ratio is 20.55 while VGT’s Mean Return is 1.76. Furthermore, the fund has a Standard Deviation of 16.61 and a Beta of 1.02.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Standard Deviation of 8.44 with a R-squared of 23.34 and a Sharpe Ratio of 0.55. Its Mean Return is 0.44 while EMB’s Alpha is 0.89. Furthermore, the fund has a Beta of 1.36 and a Treynor Ratio of 3.24.
VGT’s Mean Return is 1.32 points higher than that of EMB and its R-squared is 51.50 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than EMB. The Alpha and Beta of VGT are 9.52 points higher and 0.34 points lower than EMB’s Alpha and Beta.
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Performance
Annual Returns
| Year | VGT | EMB |
| 2020 | 45.94% | 5.48% |
| 2019 | 48.68% | 15.57% |
| 2018 | 2.52% | -5.67% |
| 2017 | 37.07% | 9.98% |
| 2016 | 13.73% | 9.41% |
| 2015 | 5.02% | 0.43% |
| 2014 | 18.01% | 6.69% |
| 2013 | 30.91% | -7.42% |
| 2012 | 14.05% | 17.64% |
| 2011 | 0.52% | 7.2% |
| 2010 | 12.74% | 11.47% |
VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.
The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VGT | $10,000 | $72,718 | 20.84% |
| EMB | $10,000 | $19,295 | 6.43% |
A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.
With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
VGT’s CAGR is 14.40 percentage points higher than that of EMB and as a result, would have yielded $53,423 more on a $10,000 investment. Thus, VGT outperformed EMB by 14.40% annually.
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