VTV vs. VWO: What’s The Difference?

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

The expense ratio of VTV is 0.06 percentage points lower than VWO’s (0.04% vs. 0.1%). VTV also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VTV has provided higher returns than VWO over the past ten years.

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

Summary

VTV VWO
Name Vanguard Value Index Fund ETF Shares Vanguard FTSE Emerging Markets Index Fund ETF Shares
Category Large Value Diversified Emerging Mkts
Issuer Vanguard Vanguard
AUM 125.77B 117.28B
Avg. Return 12.07% 5.79%
Div. Yield 2.15% 1.98%
Expense Ratio 0.04% 0.1%

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 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%.

VTV’s dividend yield is 0.17% higher than that of VWO (2.15% vs. 1.98%). Also, VTV yielded on average 6.29% more per year over the past decade (12.07% vs. 5.79%). The expense ratio of VTV is 0.06 percentage points lower than VWO’s (0.04% vs. 0.1%).

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Fund Composition

Industry Exposure

VTV vs. VWO - Industry Exposure

VTV VWO
Technology 7.86% 17.06%
Industrials 12.61% 5.95%
Energy 5.59% 5.48%
Communication Services 5.49% 11.41%
Utilities 5.37% 2.55%
Healthcare 19.84% 5.33%
Consumer Defensive 10.72% 5.87%
Real Estate 3.01% 3.13%
Financial Services 22.81% 18.15%
Consumer Cyclical 3.79% 16.1%
Basic Materials 2.91% 8.98%

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 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%.

VTV is 4.66% more exposed to the Financial Services sector than VWO (22.81% vs 18.15%). VTV’s exposure to Healthcare and Industrials stocks is 14.51% higher and 6.66% higher respectively (19.84% vs. 5.33% and 12.61% vs. 5.95%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 9.61% less of the fund’s holdings compared to VWO (12.17% vs. 21.78%).

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

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%.

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%.

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Risk Analysis

VTV VWO
Mean Return 1.05 0.45
R-squared 92.61 81.69
Std. Deviation 13.78 17.64
Alpha -1.92 -1.36
Beta 0.98 1.06
Sharpe Ratio 0.87 0.27
Treynor Ratio 11.94 3.14

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

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Treynor Ratio of 3.14 with a Mean Return of 0.45 and a Sharpe Ratio of 0.27. Its Standard Deviation is 17.64 while VWO’s Alpha is -1.36. Furthermore, the fund has a Beta of 1.06 and a R-squared of 81.69.

VTV’s Mean Return is 0.60 points higher than that of VWO and its R-squared is 10.92 points higher. With a Standard Deviation of 13.78, VTV is slightly less volatile than VWO. The Alpha and Beta of VTV are 0.56 points lower and 0.08 points lower than VWO’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. VWO - Annual Returns

Year VTV VWO
2020 2.23% 15.32%
2019 25.85% 20.4%
2018 -5.39% -14.57%
2017 17.12% 31.38%
2016 16.88% 11.75%
2015 -0.89% -15.35%
2014 13.19% 0.6%
2013 33.03% -5.0%
2012 15.19% 18.84%
2011 1.16% -18.68%
2010 14.45% 18.99%

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 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

VTV vs. VWO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
VWO $10,000 $16,200 5.79%

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 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%.

VTV’s CAGR is 6.29 percentage points higher than that of VWO and as a result, would have yielded $16,963 more on a $10,000 investment. Thus, VTV outperformed VWO by 6.29% annually.


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