VUG vs. IEMG: What’s The Difference?

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

The expense ratio of VUG is 0.07 percentage points lower than IEMG’s (0.04% vs. 0.11%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided higher returns than IEMG over the past ten years.

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

Summary

VUG IEMG
Name Vanguard Growth Index Fund ETF Shares iShares Core MSCI Emerging Markets ETF
Category Large Growth Diversified Emerging Mkts
Issuer Vanguard iShares
AUM 165.53B 83.68B
Avg. Return 17.58% 7.41%
Div. Yield 0.57% 1.78%
Expense Ratio 0.04% 0.11%

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 Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.

VUG’s dividend yield is 1.21% lower than that of IEMG (0.57% vs. 1.78%). Also, VUG yielded on average 10.17% more per year over the past decade (17.58% vs. 7.41%). The expense ratio of VUG is 0.07 percentage points lower than IEMG’s (0.04% vs. 0.11%).

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Fund Composition

Industry Exposure

VUG vs. IEMG - Industry Exposure

VUG IEMG
Technology 39.05% 20.44%
Industrials 5.13% 5.92%
Energy 0.32% 4.71%
Communication Services 16.49% 11.41%
Utilities 0.0% 2.13%
Healthcare 8.09% 5.73%
Consumer Defensive 2.41% 5.68%
Real Estate 2.46% 2.75%
Financial Services 6.75% 16.9%
Consumer Cyclical 17.78% 15.67%
Basic Materials 1.52% 8.64%

The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.

VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.

The iShares Core MSCI Emerging Markets ETF (IEMG) has the most exposure to the Technology sector at 20.44%. This is followed by Financial Services and Consumer Cyclical at 16.9% and 15.67% respectively. Real Estate (2.75%), Energy (4.71%), and Consumer Defensive (5.68%) only make up 13.14% of the fund’s total assets.

IEMG’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.73%, 5.92%, 8.64%, 11.41%, and 15.67%.

VUG is 18.61% more exposed to the Technology sector than IEMG (39.05% vs 20.44%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 2.11% higher and 5.08% higher respectively (17.78% vs. 15.67% and 16.49% vs. 11.41%). In total, Energy, Basic Materials, and Consumer Defensive also make up 14.78% less of the fund’s holdings compared to IEMG (4.25% vs. 19.03%).

Holdings

VUG - Holdings

VUG Holdings Weight
Apple Inc 10.13%
Microsoft Corp 9.52%
Amazon.com Inc 6.88%
Facebook Inc Class A 3.89%
Alphabet Inc Class A 3.43%
Alphabet Inc Class C 3.22%
Tesla Inc 2.44%
NVIDIA Corp 2.21%
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%.

IEMG - Holdings

IEMG Holdings Weight
Taiwan Semiconductor Manufacturing Co Ltd 5.37%
Tencent Holdings Ltd 4.42%
Alibaba Group Holding Ltd Ordinary Shares 4.38%
Samsung Electronics Co Ltd 3.49%
Meituan 1.52%
Naspers Ltd Class N 0.93%
Vale SA 0.91%
Reliance Industries Ltd Shs Dematerialised 0.83%
China Construction Bank Corp Class H 0.77%
Infosys Ltd 0.74%

IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.

Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.

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Risk Analysis

VUG IEMG
Mean Return 1.44 0
R-squared 92.48 0
Std. Deviation 14.76 0
Alpha 1.81 0
Beta 1.04 0
Sharpe Ratio 1.13 0
Treynor Ratio 16.13 0

The Vanguard Growth Index Fund ETF Shares (VUG) has a Standard Deviation of 14.76 with a R-squared of 92.48 and a Treynor Ratio of 16.13. Its Sharpe Ratio is 1.13 while VUG’s Alpha is 1.81. Furthermore, the fund has a Mean Return of 1.44 and a Beta of 1.04.

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Beta of 0 with a Standard Deviation of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while IEMG’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.

VUG’s Mean Return is 1.44 points higher than that of IEMG and its R-squared is 92.48 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than IEMG. The Alpha and Beta of VUG are 1.81 points higher and 1.04 points higher than IEMG’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. IEMG - Annual Returns

Year VUG IEMG
2020 40.16% 18.18%
2019 37.26% 17.5%
2018 -3.32% -14.69%
2017 27.8% 36.78%
2016 6.13% 9.98%
2015 3.32% -13.86%
2014 13.62% -2.04%
2013 32.38% -2.16%
2012 17.03% 0.0%
2011 1.87% 0.0%
2010 17.11% 0.0%

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 2017 was the strongest year for IEMG, returning 36.78% on an annual basis. The poorest year for IEMG in the last ten years was 2018, with a yield of -14.69%. Most years the iShares Core MSCI Emerging Markets ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

VUG vs. IEMG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VUG $10,000 $29,615 17.58%
IEMG $10,000 $15,037 7.41%

A $10,000 investment in VUG would have resulted in a final balance of $29,615. This is a profit of $19,615 over 7 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

With a $10,000 investment in IEMG, the end total would have been $15,037. This equates to a $5,037 profit over 7 years and a compound annual growth rate (CAGR) of 7.41%.

VUG’s CAGR is 10.17 percentage points higher than that of IEMG and as a result, would have yielded $14,578 more on a $10,000 investment. Thus, VUG outperformed IEMG by 10.17% annually.


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