The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VO and EMB? And which fund is better?
The expense ratio of VO is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%). VO also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, VO has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VO vs. EMB. We’ll look at fund composition and performance, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VO’s and EMB’s annual returns, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Mid-Cap Blend||Emerging Markets Bond|
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 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%.
VO’s dividend yield is 2.62% lower than that of EMB (1.23% vs. 3.85%). Also, VO yielded on average 7.90% more per year over the past decade (14.34% vs. 6.43%). The expense ratio of VO is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%).
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|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%.
|EMB Bond Sectors||Weight|
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.
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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Beta of 1.11 and a Standard Deviation of 15.65. Its Sharpe Ratio is 0.83 while VO’s Alpha is -2.71. Furthermore, the fund has a Mean Return of 1.14 and a Treynor Ratio of 11.32.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a R-squared of 23.34 with a Beta of 1.36 and a Treynor Ratio of 3.24. Its Mean Return is 0.44 while EMB’s Standard Deviation is 8.44. Furthermore, the fund has a Sharpe Ratio of 0.55 and a Alpha of 0.89.
VO’s Mean Return is 0.70 points higher than that of EMB and its R-squared is 68.88 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than EMB. The Alpha and Beta of VO are 3.60 points lower and 0.25 points lower than EMB’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 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.
|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 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%.
VO’s CAGR is 7.90 percentage points higher than that of EMB and as a result, would have yielded $21,109 more on a $10,000 investment. Thus, VO outperformed EMB by 7.90% annually.
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