VOO vs. VWO: What’s The Difference?

The Vanguard S&P 500 ETF (VOO) and the Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and VWO is a Vanguard Diversified Emerging Mkts fund. So, what’s the difference between VOO and VWO? And which fund is better?

The expense ratio of VOO is 0.07 percentage points lower than VWO’s (0.03% vs. 0.1%). VOO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VOO has provided higher returns than VWO over the past ten years.

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

Summary

VOO VWO
Name Vanguard S&P 500 ETF Vanguard FTSE Emerging Markets Index Fund ETF Shares
Category Large Blend Diversified Emerging Mkts
Issuer Vanguard Vanguard
AUM 753.41B 117.28B
Avg. Return 14.45% 5.79%
Div. Yield 1.34% 1.98%
Expense Ratio 0.03% 0.1%

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 Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) is a Diversified Emerging Mkts fund that is issued by Vanguard. It currently has 117.28B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 1.98% with an expense ratio of 0.1%.

VOO’s dividend yield is 0.64% lower than that of VWO (1.34% vs. 1.98%). Also, VOO yielded on average 8.66% more per year over the past decade (14.45% vs. 5.79%). The expense ratio of VOO is 0.07 percentage points lower than VWO’s (0.03% vs. 0.1%).

Fund Composition

Industry Exposure

VOO vs. VWO - Industry Exposure

VOO VWO
Technology 24.24% 17.06%
Industrials 8.86% 5.95%
Energy 2.84% 5.48%
Communication Services 11.14% 11.41%
Utilities 2.43% 2.55%
Healthcare 13.1% 5.33%
Consumer Defensive 6.32% 5.87%
Real Estate 2.58% 3.13%
Financial Services 14.2% 18.15%
Consumer Cyclical 12.01% 16.1%
Basic Materials 2.27% 8.98%

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 Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has the most exposure to the Financial Services sector at 18.15%. This is followed by Technology and Consumer Cyclical at 17.06% and 16.1% respectively. Real Estate (3.13%), Healthcare (5.33%), and Energy (5.48%) only make up 13.94% of the fund’s total assets.

VWO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.87%, 5.95%, 8.98%, 11.41%, and 16.1%.

VOO is 7.18% more exposed to the Technology sector than VWO (24.24% vs 17.06%). VOO’s exposure to Financial Services and Healthcare stocks is 3.95% lower and 7.77% higher respectively (14.2% vs. 18.15% and 13.1% vs. 5.33%). In total, Utilities, Real Estate, and Energy also make up 3.31% less of the fund’s holdings compared to VWO (7.85% vs. 11.16%).

Holdings

VOO - Holdings

VOO Holdings Weight
Apple Inc 5.92%
Microsoft Corp 5.62%
Amazon.com Inc 4.06%
Facebook Inc Class A 2.29%
Alphabet Inc Class A 2.02%
Alphabet Inc Class C 1.97%
Tesla Inc 1.44%
Berkshire Hathaway Inc Class B 1.44%
NVIDIA Corp 1.37%
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%.

VWO - Holdings

VWO Holdings Weight
Tencent Holdings Ltd 5.29%
Alibaba Group Holding Ltd Ordinary Shares 4.73%
Taiwan Semiconductor Manufacturing Co Ltd 4.58%
Meituan 1.88%
Taiwan Semiconductor Manufacturing Co Ltd ADR 1.7%
Reliance Industries Ltd Shs Dematerialised 1.06%
Naspers Ltd Class N 1.01%
Vale SA 0.92%
Infosys Ltd 0.91%
China Construction Bank Corp Class H 0.84%

VWO’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Taiwan Semiconductor Manufacturing Co Ltd, Meituan, and Taiwan Semiconductor Manufacturing Co Ltd ADR at 5.29%, 4.73%, 4.58%, 1.88%, and 1.7%.

Reliance Industries Ltd Shs Dematerialised (1.06%), Naspers Ltd Class N (1.01%), and Vale SA (0.92%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the VWO’s holdings at 0.91% and 0.84%.

Performance

Annual Returns

VOO vs. VWO - Annual Returns

Year VOO VWO
2020 18.35% 15.32%
2019 31.46% 20.4%
2018 -4.42% -14.57%
2017 21.78% 31.38%
2016 11.93% 11.75%
2015 1.35% -15.35%
2014 13.63% 0.6%
2013 32.33% -5.0%
2012 15.98% 18.84%
2011 2.09% -18.68%
2010 0.0% 18.99%

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 VWO, returning 31.38% on an annual basis. The poorest year for VWO in the last ten years was 2011, with a yield of -18.68%. Most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2020, when gains were 0.6%, 11.75%, and 15.32% respectively.

Portfolio Growth

VOO vs. VWO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VOO $10,000 $36,575 14.45%
VWO $10,000 $13,615 5.79%

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 VWO, the end total would have been $13,615. This equates to a $3,615 profit over 10 years and a compound annual growth rate (CAGR) of 5.79%.

VOO’s CAGR is 8.66 percentage points higher than that of VWO and as a result, would have yielded $22,960 more on a $10,000 investment. Thus, VOO outperformed VWO by 8.66% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply