The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between VWO and ARKK? And which fund is better?
The expense ratio of VWO is 0.65 percentage points lower than ARKK’s (0.1% vs. 0.75%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than ARKK over the past ten years.
In this article, we’ll compare VWO vs. ARKK. We’ll look at risk metrics and holdings, as well as at their annual returns and performance. Moreover, I’ll also discuss VWO’s and ARKK’s industry exposure, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| VWO | ARKK | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | ARK Innovation ETF |
| Category | Diversified Emerging Mkts | Mid-Cap Growth |
| Issuer | Vanguard | ARK ETF Trust |
| AUM | 117.28B | 25.52B |
| Avg. Return | 5.79% | 55.45% |
| Div. Yield | 1.98% | 0.0% |
| Expense Ratio | 0.1% | 0.75% |
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%.
The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.
VWO’s dividend yield is 1.98% higher than that of ARKK (1.98% vs. 0.0%). Also, VWO yielded on average 49.66% less per year over the past decade (5.79% vs. 55.45%). The expense ratio of VWO is 0.65 percentage points lower than ARKK’s (0.1% vs. 0.75%).
Fund Composition
Industry Exposure
| VWO | ARKK | |
| Technology | 17.06% | 30.5% |
| Industrials | 5.95% | 2.11% |
| Energy | 5.48% | 0.0% |
| Communication Services | 11.41% | 25.01% |
| Utilities | 2.55% | 0.0% |
| Healthcare | 5.33% | 29.47% |
| Consumer Defensive | 5.87% | 0.93% |
| Real Estate | 3.13% | 0.51% |
| Financial Services | 18.15% | 0.04% |
| Consumer Cyclical | 16.1% | 11.42% |
| Basic Materials | 8.98% | 0.0% |
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%.
The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.
ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.
VWO is 18.11% more exposed to the Financial Services sector than ARKK (18.15% vs 0.04%). VWO’s exposure to Technology and Consumer Cyclical stocks is 13.44% lower and 4.68% higher respectively (17.06% vs. 30.5% and 16.1% vs. 11.42%). In total, Real Estate, Healthcare, and Energy also make up 16.04% less of the fund’s holdings compared to ARKK (13.94% vs. 29.98%).
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%.
| ARKK Holdings | Weight |
| Tesla Inc | 9.56% |
| Roku Inc Class A | 6.48% |
| Teladoc Health Inc | 5.76% |
| Square Inc A | 4.37% |
| Zoom Video Communications Inc | 4.36% |
| Shopify Inc A | 4.27% |
| Spotify Technology SA | 3.68% |
| Twilio Inc A | 3.66% |
| Coinbase Global Inc Ordinary Shares – Class A | 3.65% |
| Unity Software Inc Ordinary Shares | 3.41% |
ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.
Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.
Risk Analysis
| VWO | ARKK | |
| Mean Return | 0.45 | 0 |
| R-squared | 81.69 | 0 |
| Std. Deviation | 17.64 | 0 |
| Alpha | -1.36 | 0 |
| Beta | 1.06 | 0 |
| Sharpe Ratio | 0.27 | 0 |
| Treynor Ratio | 3.14 | 0 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Standard Deviation of 17.64 and a Alpha of -1.36. Its Sharpe Ratio is 0.27 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a R-squared of 81.69 and a Beta of 1.06.
The ARK Innovation ETF (ARKK) has a Sharpe Ratio of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Mean Return is 0 while ARKK’s Standard Deviation is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.
VWO’s Mean Return is 0.45 points higher than that of ARKK and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than ARKK. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than ARKK’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | ARKK |
| 2020 | 15.32% | 152.52% |
| 2019 | 20.4% | 35.73% |
| 2018 | -14.57% | 3.58% |
| 2017 | 31.38% | 87.38% |
| 2016 | 11.75% | -1.96% |
| 2015 | -15.35% | 3.76% |
| 2014 | 0.6% | 0.0% |
| 2013 | -5.0% | 0.0% |
| 2012 | 18.84% | 0.0% |
| 2011 | -18.68% | 0.0% |
| 2010 | 18.99% | 0.0% |
VWO had its best year in 2017 with an annual return of 31.38%. VWO’s worst year over the past decade yielded -18.68% and occurred in 2011. In most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares provided moderate returns such as in 2014, 2016, and 2020 where annual returns amounted to 0.6%, 11.75%, and 15.32% respectively.
The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $17,414 | 5.79% |
| ARKK | $10,000 | $65,218 | 55.45% |
A $10,000 investment in VWO would have resulted in a final balance of $17,414. This is a profit of $7,414 over 5 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.
VWO’s CAGR is 49.66 percentage points lower than that of ARKK and as a result, would have yielded $47,804 less on a $10,000 investment. Thus, VWO performed worse than ARKK by 49.66% annually.
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