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VO vs. EEM: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VO and EEM? And which fund is better?

The expense ratio of VO is 0.64 percentage points lower than EEM’s (0.04% vs. 0.68%). VO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VO has provided higher returns than EEM over the past ten years.

In this article, we’ll compare VO vs. EEM. We’ll look at fund composition and risk metrics, as well as at their performance and industry exposure. Moreover, I’ll also discuss VO’s and EEM’s holdings, annual returns, and portfolio growth and examine how these affect their overall returns.

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Summary

VOEEM
NameVanguard Mid-Cap Index Fund ETF SharesiShares MSCI Emerging Markets ETF
CategoryMid-Cap BlendDiversified Emerging Mkts
IssuerVanguardiShares
AUM154.08B30.33B
Avg. Return14.34%5.47%
Div. Yield1.23%1.48%
Expense Ratio0.04%0.68%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

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%.

VO’s dividend yield is 0.25% lower than that of EEM (1.23% vs. 1.48%). Also, VO yielded on average 8.86% more per year over the past decade (14.34% vs. 5.47%). The expense ratio of VO is 0.64 percentage points lower than EEM’s (0.04% vs. 0.68%).

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Fund Composition

Industry Exposure

VO vs. EEM - Industry Exposure

VOEEM
Technology22.01%21.36%
Industrials11.92%4.61%
Energy3.82%5.17%
Communication Services5.61%11.76%
Utilities5.12%1.99%
Healthcare13.03%5.06%
Consumer Defensive3.25%5.45%
Real Estate8.67%1.98%
Financial Services11.08%18.39%
Consumer Cyclical12.12%15.16%
Basic Materials3.36%9.07%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

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%.

VO is 0.65% more exposed to the Technology sector than EEM (22.01% vs 21.36%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 7.97% higher and 3.04% lower respectively (13.03% vs. 5.06% and 12.12% vs. 15.16%). In total, Basic Materials, Energy, and Utilities also make up 3.93% less of the fund’s holdings compared to EEM (12.30% vs. 16.23%).

Holdings

VO - Holdings

VO HoldingsWeight
IDEXX Laboratories Inc0.78%
DocuSign Inc0.75%
Marvell Technology Inc0.68%
IQVIA Holdings Inc0.68%
Chipotle Mexican Grill Inc0.63%
Veeva Systems Inc Class A0.62%
Digital Realty Trust Inc0.62%
Centene Corp0.62%
Aptiv PLC0.62%
Carrier Global Corp Ordinary Shares0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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

VOEEM
Mean Return1.140.38
R-squared92.2283.5
Std. Deviation15.6517.79
Alpha-2.71-2.33
Beta1.111.08
Sharpe Ratio0.830.22
Treynor Ratio11.322.22

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Beta of 1.11 with a Alpha of -2.71 and a Sharpe Ratio of 0.83. Its Mean Return is 1.14 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a R-squared of 92.22 and a Treynor Ratio of 11.32.

The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Treynor Ratio of 2.22 and a Beta of 1.08. Its Sharpe Ratio is 0.22 while EEM’s R-squared is 83.5. Furthermore, the fund has a Standard Deviation of 17.79 and a Alpha of -2.33.

VO’s Mean Return is 0.76 points higher than that of EEM and its R-squared is 8.72 points higher. With a Standard Deviation of 15.65, VO is slightly less volatile than EEM. The Alpha and Beta of VO are 0.38 points lower and 0.03 points higher than EEM’s Alpha and Beta.

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Performance

Annual Returns

VO vs. EEM - Annual Returns

YearVOEEM
202018.22%17.56%
201931.04%17.67%
2018-9.21%-14.98%
201719.25%36.42%
201611.23%10.51%
2015-1.34%-15.41%
201413.76%-2.82%
201335.15%-3.14%
201215.98%17.32%
2011-1.96%-18.87%
201025.57%15.93%

VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% 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

VO vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VO$10,000$40,40414.34%
EEM$10,000$15,5785.47%

A $10,000 investment in VO would have resulted in a final balance of $40,404. This is a profit of $30,404 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

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%.

VO’s CAGR is 8.86 percentage points higher than that of EEM and as a result, would have yielded $24,826 more on a $10,000 investment. Thus, VO outperformed EEM by 8.86% annually.


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