The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and VWO is a Vanguard Diversified Emerging Mkts fund. So, what’s the difference between VTI and VWO? And which fund is better?
The expense ratio of VTI is 0.07 percentage points lower than VWO’s (0.03% vs. 0.1%). VTI also has a higher exposure to the technology sector and a lower standard deviation. Overall, VTI has provided higher returns than VWO over the past ten years.
In this article, we’ll compare VTI vs. VWO. We’ll look at fund composition and risk metrics, as well as at their annual returns and performance. Moreover, I’ll also discuss VTI’s and VWO’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard Total Stock Market Index Fund ETF Shares||Vanguard FTSE Emerging Markets Index Fund ETF Shares|
|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 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%.
VTI’s dividend yield is 0.72% lower than that of VWO (1.26% vs. 1.98%). Also, VTI yielded on average 8.91% more per year over the past decade (14.70% vs. 5.79%). The expense ratio of VTI is 0.07 percentage points lower than VWO’s (0.03% vs. 0.1%).
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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 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%.
VTI is 7.04% more exposed to the Technology sector than VWO (24.1% vs 17.06%). VTI’s exposure to Financial Services and Healthcare stocks is 4.38% lower and 8.31% higher respectively (13.77% vs. 18.15% and 13.64% vs. 5.33%). In total, Basic Materials, Energy, and Real Estate also make up 8.79% less of the fund’s holdings compared to VWO (8.80% vs. 17.59%).
|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%.
|Tencent Holdings Ltd||5.29%|
|Alibaba Group Holding Ltd Ordinary Shares||4.73%|
|Taiwan Semiconductor Manufacturing Co Ltd||4.58%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||1.7%|
|Reliance Industries Ltd Shs Dematerialised||1.06%|
|Naspers Ltd Class N||1.01%|
|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%.
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 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.
|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 VWO, the end total would have been $16,200. This equates to a $6,200 profit over 11 years and a compound annual growth rate (CAGR) of 5.79%.
VTI’s CAGR is 8.91 percentage points higher than that of VWO and as a result, would have yielded $26,448 more on a $10,000 investment. Thus, VTI outperformed VWO by 8.91% annually.
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