The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Core S&P Small-Cap ETF (IJR) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IJR is a iShares Small Blend fund. So, what’s the difference between VWO and IJR? And which fund is better?
The expense ratio of VWO is 0.04 percentage points higher than IJR’s (0.1% vs. 0.06%). VWO also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than IJR over the past ten years.
In this article, we’ll compare VWO vs. IJR. We’ll look at fund composition and risk metrics, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VWO’s and IJR’s performance, annual returns, and holdings and examine how these affect their overall returns.
Summary
| VWO | IJR | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | iShares Core S&P Small-Cap ETF |
| Category | Diversified Emerging Mkts | Small Blend |
| Issuer | Vanguard | iShares |
| AUM | 117.28B | 68.64B |
| Avg. Return | 5.79% | 13.97% |
| Div. Yield | 1.98% | 0.96% |
| Expense Ratio | 0.1% | 0.06% |
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 S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.
VWO’s dividend yield is 1.02% higher than that of IJR (1.98% vs. 0.96%). Also, VWO yielded on average 8.18% less per year over the past decade (5.79% vs. 13.97%). The expense ratio of VWO is 0.04 percentage points higher than IJR’s (0.1% vs. 0.06%).
Fund Composition
Industry Exposure
| VWO | IJR | |
| Technology | 17.06% | 14.32% |
| Industrials | 5.95% | 17.31% |
| Energy | 5.48% | 4.0% |
| Communication Services | 11.41% | 2.59% |
| Utilities | 2.55% | 1.8% |
| Healthcare | 5.33% | 11.55% |
| Consumer Defensive | 5.87% | 4.01% |
| Real Estate | 3.13% | 9.55% |
| Financial Services | 18.15% | 15.91% |
| Consumer Cyclical | 16.1% | 13.61% |
| Basic Materials | 8.98% | 5.34% |
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 S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.
IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.
VWO is 2.24% more exposed to the Financial Services sector than IJR (18.15% vs 15.91%). VWO’s exposure to Technology and Consumer Cyclical stocks is 2.74% higher and 2.49% higher respectively (17.06% vs. 14.32% and 16.1% vs. 13.61%). In total, Real Estate, Healthcare, and Energy also make up 11.16% less of the fund’s holdings compared to IJR (13.94% vs. 25.10%).
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%.
| IJR Holdings | Weight |
| BlackRock Cash Funds Treasury SL Agency | 1.08% |
| GameStop Corp Class A | 0.86% |
| Omnicell Inc | 0.61% |
| Stamps.com Inc | 0.58% |
| Saia Inc | 0.57% |
| Power Integrations Inc | 0.57% |
| Exponent Inc | 0.54% |
| NeoGenomics Inc | 0.53% |
| Chart Industries Inc | 0.53% |
| Macy’s Inc | 0.51% |
IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.
Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.
Risk Analysis
| VWO | IJR | |
| Mean Return | 0.45 | 1.21 |
| R-squared | 81.69 | 76.03 |
| Std. Deviation | 17.64 | 18.68 |
| Alpha | -1.36 | -3.7 |
| Beta | 1.06 | 1.2 |
| Sharpe Ratio | 0.27 | 0.74 |
| Treynor Ratio | 3.14 | 10.77 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a R-squared of 81.69 with a Mean Return of 0.45 and a Sharpe Ratio of 0.27. Its Treynor Ratio is 3.14 while VWO’s Beta is 1.06. Furthermore, the fund has a Standard Deviation of 17.64 and a Alpha of -1.36.
The iShares Core S&P Small-Cap ETF (IJR) has a Alpha of -3.7 with a Mean Return of 1.21 and a Standard Deviation of 18.68. Its Beta is 1.2 while IJR’s Sharpe Ratio is 0.74. Furthermore, the fund has a Treynor Ratio of 10.77 and a R-squared of 76.03.
VWO’s Mean Return is 0.76 points lower than that of IJR and its R-squared is 5.66 points higher. With a Standard Deviation of 17.64, VWO is slightly less volatile than IJR. The Alpha and Beta of VWO are 2.34 points higher and 0.14 points lower than IJR’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | IJR |
| 2020 | 15.32% | 11.24% |
| 2019 | 20.4% | 22.79% |
| 2018 | -14.57% | -8.43% |
| 2017 | 31.38% | 13.2% |
| 2016 | 11.75% | 26.49% |
| 2015 | -15.35% | -2.0% |
| 2014 | 0.6% | 5.67% |
| 2013 | -5.0% | 41.36% |
| 2012 | 18.84% | 16.28% |
| 2011 | -18.68% | 0.9% |
| 2010 | 18.99% | 26.14% |
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 2013 was the strongest year for IJR, returning 41.36% on an annual basis. The poorest year for IJR in the last ten years was 2018, with a yield of -8.43%. Most years the iShares Core S&P Small-Cap ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 11.24%, 13.2%, and 16.28% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| IJR | $10,000 | $38,800 | 13.97% |
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 IJR, the end total would have been $38,800. This equates to a $28,800 profit over 11 years and a compound annual growth rate (CAGR) of 13.97%.
VWO’s CAGR is 8.18 percentage points lower than that of IJR and as a result, would have yielded $22,600 less on a $10,000 investment. Thus, VWO performed worse than IJR by 8.18% annually.
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