VO vs. VEU: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between VO and VEU? And which fund is better?

The expense ratio of VO is 0.04 percentage points lower than VEU’s (0.04% vs. 0.08%). VO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VO has provided higher returns than VEU over the past ten years.

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

Summary

VO VEU
Name Vanguard Mid-Cap Index Fund ETF Shares Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Mid-Cap Blend Foreign Large Blend
Issuer Vanguard Vanguard
AUM 154.08B 53.64B
Avg. Return 14.34% 6.64%
Div. Yield 1.23% 2.31%
Expense Ratio 0.04% 0.08%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

VO’s dividend yield is 1.08% lower than that of VEU (1.23% vs. 2.31%). Also, VO yielded on average 7.70% more per year over the past decade (14.34% vs. 6.64%). The expense ratio of VO is 0.04 percentage points lower than VEU’s (0.04% vs. 0.08%).

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Fund Composition

Industry Exposure

VO vs. VEU - Industry Exposure

VO VEU
Technology 22.01% 12.94%
Industrials 11.92% 12.19%
Energy 3.82% 4.69%
Communication Services 5.61% 7.44%
Utilities 5.12% 2.89%
Healthcare 13.03% 9.34%
Consumer Defensive 3.25% 8.28%
Real Estate 8.67% 3.04%
Financial Services 11.08% 18.46%
Consumer Cyclical 12.12% 12.57%
Basic Materials 3.36% 8.17%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

VO is 9.07% more exposed to the Technology sector than VEU (22.01% vs 12.94%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 3.69% higher and 0.45% lower respectively (13.03% vs. 9.34% and 12.12% vs. 12.57%). In total, Basic Materials, Energy, and Utilities also make up 3.45% less of the fund’s holdings compared to VEU (12.30% vs. 15.75%).

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
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%
Centene Corp 0.62%
Aptiv PLC 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%.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

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Risk Analysis

VO VEU
Mean Return 1.14 0.56
R-squared 92.22 98.44
Std. Deviation 15.65 15.08
Alpha -2.71 0.28
Beta 1.11 0.99
Sharpe Ratio 0.83 0.4
Treynor Ratio 11.32 5.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Treynor Ratio of 5.12 with a Beta of 0.99 and a Alpha of 0.28. Its Mean Return is 0.56 while VEU’s Sharpe Ratio is 0.4. Furthermore, the fund has a Standard Deviation of 15.08 and a R-squared of 98.44.

VO’s Mean Return is 0.58 points higher than that of VEU and its R-squared is 6.22 points lower. With a Standard Deviation of 15.65, VO is slightly more volatile than VEU. The Alpha and Beta of VO are 2.99 points lower and 0.12 points higher than VEU’s Alpha and Beta.

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Performance

Annual Returns

VO vs. VEU - Annual Returns

Year VO VEU
2020 18.22% 11.39%
2019 31.04% 21.63%
2018 -9.21% -13.97%
2017 19.25% 27.27%
2016 11.23% 4.77%
2015 -1.34% -4.67%
2014 13.76% -4.05%
2013 35.15% 14.5%
2012 15.98% 18.55%
2011 -1.96% -14.25%
2010 25.57% 11.85%

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 VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

VO vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $40,404 14.34%
VEU $10,000 $18,507 6.64%

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 VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.

VO’s CAGR is 7.70 percentage points higher than that of VEU and as a result, would have yielded $21,897 more on a $10,000 investment. Thus, VO outperformed VEU by 7.70% annually.


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