The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between VWO and BIV? And which fund is better?
The expense ratio of VWO is 0.05 percentage points higher than BIV’s (0.1% vs. 0.05%). VWO also has a high exposure to the financial services sector while BIV is mostly comprised of AAA bonds. Overall, VWO has provided higher returns than BIV over the past ten years.
In this article, we’ll compare VWO vs. BIV. We’ll look at risk metrics and holdings, as well as at their annual returns and fund composition. Moreover, I’ll also discuss VWO’s and BIV’s performance, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||Vanguard Intermediate-Term Bond Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Intermediate-Term Bond|
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 Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.
VWO’s dividend yield is 0.08% lower than that of BIV (1.98% vs. 2.06%). Also, VWO yielded on average 0.48% more per year over the past decade (5.79% vs. 5.31%). The expense ratio of VWO is 0.05 percentage points higher than BIV’s (0.1% vs. 0.05%).
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|Tencent Holdings Ltd||5.29%|
|Alibaba Group Holding Ltd Ordinary Shares||4.73%|
|Taiwan Semiconductor Manufacturing Co Ltd||4.58%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||1.7%|
|Reliance Industries Ltd Shs Dematerialised||1.06%|
|Naspers Ltd Class N||1.01%|
|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%.
|BIV Bond Sectors||Weight|
BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a R-squared of 81.69 with a Treynor Ratio of 3.14 and a Mean Return of 0.45. Its Beta is 1.06 while VWO’s Standard Deviation is 17.64. Furthermore, the fund has a Sharpe Ratio of 0.27 and a Alpha of -1.36.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Alpha of -0.07 with a Mean Return of 0.35 and a Sharpe Ratio of 0.89. Its Treynor Ratio is 2.72 while BIV’s R-squared is 95.12. Furthermore, the fund has a Standard Deviation of 4.09 and a Beta of 1.33.
VWO’s Mean Return is 0.10 points higher than that of BIV and its R-squared is 13.43 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than BIV. The Alpha and Beta of VWO are 1.29 points lower and 0.27 points lower than BIV’s Alpha and Beta.
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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 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VWO would have resulted in a final balance of $16,200. This is a profit of $6,200 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.
VWO’s CAGR is 0.48 percentage points higher than that of BIV and as a result, would have yielded $1,292 less on a $10,000 investment. Thus, VWO outperformed BIV by 0.48% annually.
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