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

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

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

Summary

VUGVWO
NameVanguard Growth Index Fund ETF SharesVanguard FTSE Emerging Markets Index Fund ETF Shares
CategoryLarge GrowthDiversified Emerging Mkts
IssuerVanguardVanguard
AUM165.53B117.28B
Avg. Return17.58%5.79%
Div. Yield0.57%1.98%
Expense Ratio0.04%0.1%

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 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%.

VUG’s dividend yield is 1.41% lower than that of VWO (0.57% vs. 1.98%). Also, VUG yielded on average 11.79% more per year over the past decade (17.58% vs. 5.79%). The expense ratio of VUG is 0.06 percentage points lower than VWO’s (0.04% vs. 0.1%).

Fund Composition

Industry Exposure

VUG vs. VWO - Industry Exposure

VUGVWO
Technology39.05%17.06%
Industrials5.13%5.95%
Energy0.32%5.48%
Communication Services16.49%11.41%
Utilities0.0%2.55%
Healthcare8.09%5.33%
Consumer Defensive2.41%5.87%
Real Estate2.46%3.13%
Financial Services6.75%18.15%
Consumer Cyclical17.78%16.1%
Basic Materials1.52%8.98%

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 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%.

VUG is 21.99% more exposed to the Technology sector than VWO (39.05% vs 17.06%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 1.68% higher and 5.08% higher respectively (17.78% vs. 16.1% and 16.49% vs. 11.41%). In total, Energy, Basic Materials, and Consumer Defensive also make up 16.08% less of the fund’s holdings compared to VWO (4.25% vs. 20.33%).

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

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%.

VWO - Holdings

VWO HoldingsWeight
Tencent Holdings Ltd5.29%
Alibaba Group Holding Ltd Ordinary Shares4.73%
Taiwan Semiconductor Manufacturing Co Ltd4.58%
Meituan1.88%
Taiwan Semiconductor Manufacturing Co Ltd ADR1.7%
Reliance Industries Ltd Shs Dematerialised1.06%
Naspers Ltd Class N1.01%
Vale SA0.92%
Infosys Ltd0.91%
China Construction Bank Corp Class H0.84%

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%.

Risk Analysis

VUGVWO
Mean Return1.440.45
R-squared92.4881.69
Std. Deviation14.7617.64
Alpha1.81-1.36
Beta1.041.06
Sharpe Ratio1.130.27
Treynor Ratio16.133.14

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

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

VUG’s Mean Return is 0.99 points higher than that of VWO and its R-squared is 10.79 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than VWO. The Alpha and Beta of VUG are 3.17 points higher and 0.02 points lower than VWO’s Alpha and Beta.

Performance

Annual Returns

VUG vs. VWO - Annual Returns

YearVUGVWO
202040.16%15.32%
201937.26%20.4%
2018-3.32%-14.57%
201727.8%31.38%
20166.13%11.75%
20153.32%-15.35%
201413.62%0.6%
201332.38%-5.0%
201217.03%18.84%
20111.87%-18.68%
201017.11%18.99%

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 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

VUG vs. VWO - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
VWO$10,000$16,2005.79%

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 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%.

VUG’s CAGR is 11.79 percentage points higher than that of VWO and as a result, would have yielded $38,535 more on a $10,000 investment. Thus, VUG outperformed VWO by 11.79% annually.

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