VIG vs. EEM: What’s The Difference?

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.

Summary

VIG EEM
Name Vanguard Dividend Appreciation Index Fund ETF Shares iShares MSCI Emerging Markets ETF
Category Large Blend Diversified Emerging Mkts
Issuer Vanguard iShares
AUM 71.92B 30.33B
Avg. Return 13.35% 5.47%
Div. Yield 1.56% 1.48%
Expense Ratio 0.06% 0.68%

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%).

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Fund Composition

Industry Exposure

VIG vs. EEM - Industry Exposure

VIG EEM
Technology 14.93% 21.36%
Industrials 17.23% 4.61%
Energy 0.0% 5.17%
Communication Services 2.86% 11.76%
Utilities 2.81% 1.99%
Healthcare 15.52% 5.06%
Consumer Defensive 15.32% 5.45%
Real Estate 0.0% 1.98%
Financial Services 17.18% 18.39%
Consumer Cyclical 10.47% 15.16%
Basic Materials 3.67% 9.07%

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%).

Holdings

VIG - Holdings

VIG Holdings Weight
Microsoft Corp 4.19%
JPMorgan Chase & Co 3.8%
Johnson & Johnson 3.67%
Walmart Inc 3.38%
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%
Coca-Cola Co 1.98%

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%.

EEM - Holdings

EEM Holdings Weight
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%
Meituan 1.24%
Vale SA 1.04%
Naspers Ltd Class N 1.04%
Reliance Industries Ltd Shs Dematerialised 0.97%
Infosys Ltd 0.92%
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%.

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Risk Analysis

VIG EEM
Mean Return 1.09 0.38
R-squared 92.2 83.5
Std. Deviation 12.25 17.79
Alpha 0.12 -2.33
Beta 0.86 1.08
Sharpe Ratio 1.01 0.22
Treynor Ratio 14.33 2.22

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.

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Performance

Annual Returns

VIG vs. EEM - Annual Returns

Year VIG EEM
2020 15.46% 17.56%
2019 29.71% 17.67%
2018 -2.02% -14.98%
2017 22.22% 36.42%
2016 11.84% 10.51%
2015 -1.95% -15.41%
2014 10.06% -2.82%
2013 28.99% -3.14%
2012 11.61% 17.32%
2011 6.21% -18.87%
2010 14.67% 15.93%

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.

Portfolio Growth

VIG vs. EEM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $37,951 13.35%
EEM $10,000 $15,578 5.47%

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.


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