The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VTI and EEM? And which fund is better?
The expense ratio of VTI is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%). VTI also has a higher exposure to the technology sector and a lower standard deviation. Overall, VTI has provided higher returns than EEM over the past ten years.
In this article, we’ll compare VTI vs. EEM. We’ll look at portfolio growth and annual returns, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss VTI’s and EEM’s holdings, industry exposure, and performance and examine how these affect their overall returns.
|Name||Vanguard Total Stock Market Index Fund ETF Shares||iShares MSCI Emerging Markets ETF|
|Category||Large Blend||Diversified Emerging Mkts|
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% 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%.
VTI’s dividend yield is 0.22% lower than that of EEM (1.26% vs. 1.48%). Also, VTI yielded on average 9.22% more per year over the past decade (14.70% vs. 5.47%). The expense ratio of VTI is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%).
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has the most exposure to the Technology sector at 24.1%. This is followed by Financial Services and Healthcare at 13.77% and 13.64% respectively. Basic Materials (2.44%), Energy (2.77%), and Real Estate (3.59%) only make up 8.80% of the fund’s total assets.
VTI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.77%, 9.39%, 10.4%, 11.83%, and 13.64%.
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%.
VTI is 2.74% more exposed to the Technology sector than EEM (24.1% vs 21.36%). VTI’s exposure to Financial Services and Healthcare stocks is 4.62% lower and 8.58% higher respectively (13.77% vs. 18.39% and 13.64% vs. 5.06%). In total, Basic Materials, Energy, and Real Estate also make up 7.42% less of the fund’s holdings compared to EEM (8.80% vs. 16.22%).
|Facebook Inc Class A||1.88%|
|Alphabet Inc Class A||1.66%|
|Alphabet Inc Class C||1.56%|
|Berkshire Hathaway Inc Class B||1.09%|
|JPMorgan Chase & Co||1.06%|
VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.
|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%.
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has a Sharpe Ratio of 1 with a Treynor Ratio of 13.58 and a Beta of 1.04. Its Mean Return is 1.23 while VTI’s R-squared is 99.24. Furthermore, the fund has a Standard Deviation of 14.15 and a Alpha of -0.57.
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Standard Deviation of 17.79 and a Sharpe Ratio of 0.22. Its R-squared is 83.5 while EEM’s Alpha is -2.33. Furthermore, the fund has a Beta of 1.08 and a Treynor Ratio of 2.22.
VTI’s Mean Return is 0.85 points higher than that of EEM and its R-squared is 15.74 points higher. With a Standard Deviation of 14.15, VTI is slightly less volatile than EEM. The Alpha and Beta of VTI are 1.76 points higher and 0.04 points lower than EEM’s Alpha and Beta.
VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% 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 VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
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%.
VTI’s CAGR is 9.22 percentage points higher than that of EEM and as a result, would have yielded $27,070 more on a $10,000 investment. Thus, VTI outperformed EEM by 9.22% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.