The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VUG and EMB? And which fund is better?
The expense ratio of VUG is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%). VUG also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, VUG has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VUG vs. EMB. We’ll look at portfolio growth and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VUG’s and EMB’s fund composition, holdings, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Large Growth||Emerging Markets Bond|
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
VUG’s dividend yield is 3.28% lower than that of EMB (0.57% vs. 3.85%). Also, VUG yielded on average 11.14% more per year over the past decade (17.58% vs. 6.43%). The expense ratio of VUG is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%).
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|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
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The Vanguard Growth Index Fund ETF Shares (VUG) has a Treynor Ratio of 16.13 with a Standard Deviation of 14.76 and a Alpha of 1.81. Its R-squared is 92.48 while VUG’s Mean Return is 1.44. Furthermore, the fund has a Beta of 1.04 and a Sharpe Ratio of 1.13.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Mean Return of 0.44 with a Sharpe Ratio of 0.55 and a R-squared of 23.34. Its Alpha is 0.89 while EMB’s Standard Deviation is 8.44. Furthermore, the fund has a Beta of 1.36 and a Treynor Ratio of 3.24.
VUG’s Mean Return is 1.00 points higher than that of EMB and its R-squared is 69.14 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than EMB. The Alpha and Beta of VUG are 0.92 points higher and 0.32 points lower than EMB’s Alpha and Beta.
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VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% respectively.
The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
VUG’s CAGR is 11.14 percentage points higher than that of EMB and as a result, would have yielded $35,440 more on a $10,000 investment. Thus, VUG outperformed EMB by 11.14% annually.
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