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VTV vs. EEM: What’s The Difference?

The Vanguard Value Index Fund ETF Shares (VTV) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VTV is a Vanguard Large Value fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VTV and EEM? And which fund is better?

The expense ratio of VTV is 0.64 percentage points lower than EEM’s (0.04% vs. 0.68%). VTV also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VTV has provided higher returns than EEM over the past ten years.

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

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Summary

VTVEEM
NameVanguard Value Index Fund ETF SharesiShares MSCI Emerging Markets ETF
CategoryLarge ValueDiversified Emerging Mkts
IssuerVanguardiShares
AUM125.77B30.33B
Avg. Return12.07%5.47%
Div. Yield2.15%1.48%
Expense Ratio0.04%0.68%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.

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%.

VTV’s dividend yield is 0.67% higher than that of EEM (2.15% vs. 1.48%). Also, VTV yielded on average 6.60% more per year over the past decade (12.07% vs. 5.47%). The expense ratio of VTV is 0.64 percentage points lower than EEM’s (0.04% vs. 0.68%).

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Fund Composition

Industry Exposure

VTV vs. EEM - Industry Exposure

VTVEEM
Technology7.86%21.36%
Industrials12.61%4.61%
Energy5.59%5.17%
Communication Services5.49%11.76%
Utilities5.37%1.99%
Healthcare19.84%5.06%
Consumer Defensive10.72%5.45%
Real Estate3.01%1.98%
Financial Services22.81%18.39%
Consumer Cyclical3.79%15.16%
Basic Materials2.91%9.07%

The Vanguard Value Index Fund ETF Shares (VTV) has the most exposure to the Financial Services sector at 22.81%. This is followed by Healthcare and Industrials at 19.84% and 12.61% respectively. Real Estate (3.01%), Consumer Cyclical (3.79%), and Utilities (5.37%) only make up 12.17% of the fund’s total assets.

VTV’s mid-section with moderate exposure is comprised of Communication Services, Energy, Technology, Consumer Defensive, and Industrials stocks at 5.49%, 5.59%, 7.86%, 10.72%, and 12.61%.

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%.

VTV is 4.42% more exposed to the Financial Services sector than EEM (22.81% vs 18.39%). VTV’s exposure to Healthcare and Industrials stocks is 14.78% higher and 8.00% higher respectively (19.84% vs. 5.06% and 12.61% vs. 4.61%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 6.96% less of the fund’s holdings compared to EEM (12.17% vs. 19.13%).

Holdings

VTV - Holdings

VTV HoldingsWeight
Berkshire Hathaway Inc Class B2.98%
JPMorgan Chase & Co2.82%
Johnson & Johnson2.6%
UnitedHealth Group Inc2.27%
Procter & Gamble Co1.98%
Bank of America Corp1.91%
Exxon Mobil Corp1.6%
Comcast Corp Class A1.57%
Intel Corp1.36%
Verizon Communications Inc1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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%.

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Risk Analysis

VTVEEM
Mean Return1.050.38
R-squared92.6183.5
Std. Deviation13.7817.79
Alpha-1.92-2.33
Beta0.981.08
Sharpe Ratio0.870.22
Treynor Ratio11.942.22

The Vanguard Value Index Fund ETF Shares (VTV) has a Standard Deviation of 13.78 with a Treynor Ratio of 11.94 and a R-squared of 92.61. Its Beta is 0.98 while VTV’s Mean Return is 1.05. Furthermore, the fund has a Alpha of -1.92 and a Sharpe Ratio of 0.87.

The iShares MSCI Emerging Markets ETF (EEM) has a Alpha of -2.33 with a R-squared of 83.5 and a Sharpe Ratio of 0.22. Its Mean Return is 0.38 while EEM’s Beta is 1.08. Furthermore, the fund has a Treynor Ratio of 2.22 and a Standard Deviation of 17.79.

VTV’s Mean Return is 0.67 points higher than that of EEM and its R-squared is 9.11 points higher. With a Standard Deviation of 13.78, VTV is slightly less volatile than EEM. The Alpha and Beta of VTV are 0.41 points higher and 0.10 points lower than EEM’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. EEM - Annual Returns

YearVTVEEM
20202.23%17.56%
201925.85%17.67%
2018-5.39%-14.98%
201717.12%36.42%
201616.88%10.51%
2015-0.89%-15.41%
201413.19%-2.82%
201333.03%-3.14%
201215.19%17.32%
20111.16%-18.87%
201014.45%15.93%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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.

Portfolio Growth

VTV vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VTV$10,000$33,16312.07%
EEM$10,000$15,5785.47%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

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%.

VTV’s CAGR is 6.60 percentage points higher than that of EEM and as a result, would have yielded $17,585 more on a $10,000 investment. Thus, VTV outperformed EEM by 6.60% annually.


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