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.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares MSCI Emerging Markets ETF|
|Category||Mid-Cap Blend||Diversified Emerging Mkts|
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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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%).
|IDEXX Laboratories Inc||0.78%|
|Marvell Technology Inc||0.68%|
|IQVIA Holdings Inc||0.68%|
|Chipotle Mexican Grill Inc||0.63%|
|Veeva Systems Inc Class A||0.62%|
|Digital Realty Trust Inc||0.62%|
|Carrier Global Corp Ordinary Shares||0.61%|
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%.
|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%.
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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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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.
|Fund||Initial Balance||Final Balance||CAGR|
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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