The Vanguard S&P 500 ETF (VOO) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VOO and EEM? And which fund is better?
The expense ratio of VOO is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%). VOO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VOO has provided higher returns than EEM over the past ten years.
In this article, we’ll compare VOO vs. EEM. We’ll look at performance and portfolio growth, as well as at their holdings and annual returns. Moreover, I’ll also discuss VOO’s and EEM’s fund composition, risk metrics, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard S&P 500 ETF||iShares MSCI Emerging Markets ETF|
|Category||Large Blend||Diversified Emerging Mkts|
The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.
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%.
VOO’s dividend yield is 0.14% lower than that of EEM (1.34% vs. 1.48%). Also, VOO yielded on average 8.98% more per year over the past decade (14.45% vs. 5.47%). The expense ratio of VOO is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%).
The Vanguard S&P 500 ETF (VOO) has the most exposure to the Technology sector at 24.24%. This is followed by Financial Services and Healthcare at 14.2% and 13.1% respectively. Utilities (2.43%), Real Estate (2.58%), and Energy (2.84%) only make up 7.85% of the fund’s total assets.
VOO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 6.32%, 8.86%, 11.14%, 12.01%, and 13.1%.
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%.
VOO is 2.88% more exposed to the Technology sector than EEM (24.24% vs 21.36%). VOO’s exposure to Financial Services and Healthcare stocks is 4.19% lower and 8.04% higher respectively (14.2% vs. 18.39% and 13.1% vs. 5.06%). In total, Utilities, Real Estate, and Energy also make up 1.29% less of the fund’s holdings compared to EEM (7.85% vs. 9.14%).
|Facebook Inc Class A||2.29%|
|Alphabet Inc Class A||2.02%|
|Alphabet Inc Class C||1.97%|
|Berkshire Hathaway Inc Class B||1.44%|
|JPMorgan Chase & Co||1.3%|
VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.
|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%.
VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% 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 VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.
With a $10,000 investment in EEM, the end total would have been $13,437. This equates to a $3,437 profit over 10 years and a compound annual growth rate (CAGR) of 5.47%.
VOO’s CAGR is 8.98 percentage points higher than that of EEM and as a result, would have yielded $23,138 more on a $10,000 investment. Thus, VOO outperformed EEM by 8.98% annually.
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