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VWO vs. DGRO: What’s The Difference?

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

The expense ratio of VWO is 0.02 percentage points higher than DGRO’s (0.1% vs. 0.08%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than DGRO over the past ten years.

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

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Summary

VWODGRO
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares Core Dividend Growth ETF
CategoryDiversified Emerging MktsLarge Value
IssuerVanguardiShares
AUM117.28B20B
Avg. Return5.79%12.46%
Div. Yield1.98%2.04%
Expense Ratio0.1%0.08%

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 iShares Core Dividend Growth ETF (DGRO) is a Large Value fund that is issued by iShares. It currently has 20B total assets under management and has yielded an average annual return of 12.46% over the past 10 years. The fund has a dividend yield of 2.04% with an expense ratio of 0.08%.

VWO’s dividend yield is 0.06% lower than that of DGRO (1.98% vs. 2.04%). Also, VWO yielded on average 6.67% less per year over the past decade (5.79% vs. 12.46%). The expense ratio of VWO is 0.02 percentage points higher than DGRO’s (0.1% vs. 0.08%).

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Fund Composition

Industry Exposure

VWO vs. DGRO - Industry Exposure

VWODGRO
Technology17.06%18.98%
Industrials5.95%12.52%
Energy5.48%0.11%
Communication Services11.41%4.53%
Utilities2.55%7.34%
Healthcare5.33%17.55%
Consumer Defensive5.87%10.24%
Real Estate3.13%0.0%
Financial Services18.15%18.47%
Consumer Cyclical16.1%7.42%
Basic Materials8.98%2.83%

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 iShares Core Dividend Growth ETF (DGRO) has the most exposure to the Technology sector at 18.98%. This is followed by Financial Services and Healthcare at 18.47% and 17.55% respectively. Energy (0.11%), Basic Materials (2.83%), and Communication Services (4.53%) only make up 7.47% of the fund’s total assets.

DGRO’s mid-section with moderate exposure is comprised of Utilities, Consumer Cyclical, Consumer Defensive, Industrials, and Healthcare stocks at 7.34%, 7.42%, 10.24%, 12.52%, and 17.55%.

VWO is 0.32% less exposed to the Financial Services sector than DGRO (18.15% vs 18.47%). VWO’s exposure to Technology and Consumer Cyclical stocks is 1.92% lower and 8.68% higher respectively (17.06% vs. 18.98% and 16.1% vs. 7.42%). In total, Real Estate, Healthcare, and Energy also make up 3.72% less of the fund’s holdings compared to DGRO (13.94% vs. 17.66%).

Holdings

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%.

DGRO - Holdings

DGRO HoldingsWeight
Microsoft Corp3.29%
Apple Inc3.26%
Pfizer Inc2.89%
Johnson & Johnson2.87%
Procter & Gamble Co2.79%
Verizon Communications Inc2.68%
JPMorgan Chase & Co2.57%
The Home Depot Inc2.35%
Merck & Co Inc2.11%
Cisco Systems Inc1.98%

DGRO’s Top Holdings are Microsoft Corp, Apple Inc, Pfizer Inc, Johnson & Johnson, and Procter & Gamble Co at 3.29%, 3.26%, 2.89%, 2.87%, and 2.79%.

Verizon Communications Inc (2.68%), JPMorgan Chase & Co (2.57%), and The Home Depot Inc (2.35%) have a slightly smaller but still significant weight. Merck & Co Inc and Cisco Systems Inc are also represented in the DGRO’s holdings at 2.11% and 1.98%.

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Risk Analysis

VWODGRO
Mean Return0.450
R-squared81.690
Std. Deviation17.640
Alpha-1.360
Beta1.060
Sharpe Ratio0.270
Treynor Ratio3.140

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

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

VWO’s Mean Return is 0.45 points higher than that of DGRO and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than DGRO. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than DGRO’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. DGRO - Annual Returns

YearVWODGRO
202015.32%9.47%
201920.4%30.02%
2018-14.57%-2.24%
201731.38%22.84%
201611.75%15.27%
2015-15.35%-0.62%
20140.6%0.0%
2013-5.0%0.0%
201218.84%0.0%
2011-18.68%0.0%
201018.99%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 2019 was the strongest year for DGRO, returning 30.02% on an annual basis. The poorest year for DGRO in the last ten years was 2018, with a yield of -2.24%. Most years the iShares Core Dividend Growth 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

VWO vs. DGRO - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$14,7415.79%
DGRO$10,000$19,58012.46%

A $10,000 investment in VWO would have resulted in a final balance of $14,741. This is a profit of $4,741 over 6 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in DGRO, the end total would have been $19,580. This equates to a $9,580 profit over 6 years and a compound annual growth rate (CAGR) of 12.46%.

VWO’s CAGR is 6.67 percentage points lower than that of DGRO and as a result, would have yielded $4,839 less on a $10,000 investment. Thus, VWO performed worse than DGRO by 6.67% annually.


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