The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and ITOT is a iShares Large Blend fund. So, what’s the difference between VWO and ITOT? And which fund is better?
The expense ratio of VWO is 0.07 percentage points higher than ITOT’s (0.1% vs. 0.03%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than ITOT over the past ten years.
In this article, we’ll compare VWO vs. ITOT. We’ll look at annual returns and holdings, as well as at their risk metrics and performance. Moreover, I’ll also discuss VWO’s and ITOT’s fund composition, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||iShares Core S&P Total U.S. Stock Market ETF|
|Category||Diversified Emerging Mkts||Large Blend|
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 Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
VWO’s dividend yield is 0.78% higher than that of ITOT (1.98% vs. 1.2%). Also, VWO yielded on average 8.80% less per year over the past decade (5.79% vs. 14.59%). The expense ratio of VWO is 0.07 percentage points higher than ITOT’s (0.1% vs. 0.03%).
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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 Total U.S. Stock Market ETF (ITOT) has the most exposure to the Technology sector at 24.49%. This is followed by Financial Services and Healthcare at 13.69% and 13.59% respectively. Basic Materials (2.47%), Energy (2.51%), and Real Estate (3.67%) only make up 8.65% of the fund’s total assets.
ITOT’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.79%, 9.21%, 10.54%, 11.69%, and 13.59%.
VWO is 4.46% more exposed to the Financial Services sector than ITOT (18.15% vs 13.69%). VWO’s exposure to Technology and Consumer Cyclical stocks is 7.43% lower and 4.41% higher respectively (17.06% vs. 24.49% and 16.1% vs. 11.69%). In total, Real Estate, Healthcare, and Energy also make up 5.83% less of the fund’s holdings compared to ITOT (13.94% vs. 19.77%).
|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%.
|Facebook Inc Class A||1.89%|
|Alphabet Inc Class A||1.79%|
|Alphabet Inc Class C||1.71%|
|Berkshire Hathaway Inc Class B||1.17%|
|JPMorgan Chase & Co||1.02%|
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Treynor Ratio of 3.14 with a Sharpe Ratio of 0.27 and a Mean Return of 0.45. Its Standard Deviation is 17.64 while VWO’s R-squared is 81.69. Furthermore, the fund has a Beta of 1.06 and a Alpha of -1.36.
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Beta of 1.03 with a Treynor Ratio of 14.13 and a Sharpe Ratio of 1.04. Its Alpha is -0.54 while ITOT’s R-squared is 99.4. Furthermore, the fund has a Standard Deviation of 14.02 and a Mean Return of 1.27.
VWO’s Mean Return is 0.82 points lower than that of ITOT and its R-squared is 17.71 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than ITOT. The Alpha and Beta of VWO are 0.82 points lower and 0.03 points higher than ITOT’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 2013 was the strongest year for ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% 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 ITOT, the end total would have been $42,310. This equates to a $32,310 profit over 11 years and a compound annual growth rate (CAGR) of 14.59%.
VWO’s CAGR is 8.80 percentage points lower than that of ITOT and as a result, would have yielded $26,110 less on a $10,000 investment. Thus, VWO performed worse than ITOT by 8.80% annually.
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