The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VIG and EEM? And which fund is better?
The expense ratio of VIG is 0.62 percentage points lower than EEM’s (0.06% vs. 0.68%). VIG also has a higher exposure to the industrials sector and a lower standard deviation. Overall, VIG has provided higher returns than EEM over the past ten years.
In this article, we’ll compare VIG vs. EEM. We’ll look at industry exposure and fund composition, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VIG’s and EEM’s annual returns, portfolio growth, and performance and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||iShares MSCI Emerging Markets ETF|
|Category||Large Blend||Diversified Emerging Mkts|
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.
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%.
VIG’s dividend yield is 0.08% higher than that of EEM (1.56% vs. 1.48%). Also, VIG yielded on average 7.87% more per year over the past decade (13.35% vs. 5.47%). The expense ratio of VIG is 0.62 percentage points lower than EEM’s (0.06% 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 Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.
VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.
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%.
VIG is 12.62% more exposed to the Industrials sector than EEM (17.23% vs 4.61%). VIG’s exposure to Financial Services and Healthcare stocks is 1.21% lower and 10.46% higher respectively (17.18% vs. 18.39% and 15.52% vs. 5.06%). In total, Energy, Utilities, and Communication Services also make up 13.25% less of the fund’s holdings compared to EEM (5.67% vs. 18.92%).
|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|Visa Inc Class A||3.22%|
|UnitedHealth Group Inc||3.22%|
|The Home Depot Inc||2.91%|
|Procter & Gamble Co||2.82%|
|Comcast Corp Class A||2.21%|
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
|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 Dividend Appreciation Index Fund ETF Shares (VIG) has a Mean Return of 1.09 with a Sharpe Ratio of 1.01 and a Standard Deviation of 12.25. Its R-squared is 92.2 while VIG’s Beta is 0.86. Furthermore, the fund has a Alpha of 0.12 and a Treynor Ratio of 14.33.
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a R-squared of 83.5 and a Treynor Ratio of 2.22. Its Standard Deviation is 17.79 while EEM’s Beta is 1.08. Furthermore, the fund has a Sharpe Ratio of 0.22 and a Alpha of -2.33.
VIG’s Mean Return is 0.71 points higher than that of EEM and its R-squared is 8.70 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than EEM. The Alpha and Beta of VIG are 2.45 points higher and 0.22 points lower than EEM’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% 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 VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
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%.
VIG’s CAGR is 7.87 percentage points higher than that of EEM and as a result, would have yielded $22,373 more on a $10,000 investment. Thus, VIG outperformed EEM by 7.87% 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) 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!
2) 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!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.