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VWO vs. IUSB: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IUSB is a iShares N/A fund. So, what’s the difference between VWO and IUSB? And which fund is better?

The expense ratio of VWO is 0.04 percentage points higher than IUSB’s (0.1% vs. 0.06%). VWO also has a high exposure to the financial services sector while IUSB is mostly comprised of AAA bonds. Overall, VWO has provided higher returns than IUSB over the past ten years.

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

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Summary

VWOIUSB
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares Core Total USD Bond Market ETF
CategoryDiversified Emerging MktsN/A
IssuerVanguardiShares
AUM117.28B14.49B
Avg. Return5.79%4.13%
Div. Yield1.98%2.1%
Expense Ratio0.1%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 Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.

VWO’s dividend yield is 0.12% lower than that of IUSB (1.98% vs. 2.1%). Also, VWO yielded on average 1.66% more per year over the past decade (5.79% vs. 4.13%). The expense ratio of VWO is 0.04 percentage points higher than IUSB’s (0.1% vs. 0.06%).

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Fund Composition

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%.

IUSB - Holdings

IUSB Bond SectorsWeight
AAA58.32%
BBB16.98%
A12.27%
BB4.33%
AA3.36%
B2.8%
Others1.01%
Below B0.92%
US Government0.0%

IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.

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Risk Analysis

VWOIUSB
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 Mean Return of 0.45 with a Beta of 1.06 and a Treynor Ratio of 3.14. Its R-squared is 81.69 while VWO’s Standard Deviation is 17.64. Furthermore, the fund has a Alpha of -1.36 and a Sharpe Ratio of 0.27.

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

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

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Performance

Annual Returns

VWO vs. IUSB - Annual Returns

YearVWOIUSB
202015.32%7.59%
201920.4%9.26%
2018-14.57%-0.38%
201731.38%4.06%
201611.75%3.78%
2015-15.35%0.46%
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 IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.

Portfolio Growth

VWO vs. IUSB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$14,7415.79%
IUSB$10,000$12,7044.13%

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 IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.

VWO’s CAGR is 1.66 percentage points higher than that of IUSB and as a result, would have yielded $2,037 more on a $10,000 investment. Thus, VWO outperformed IUSB by 1.66% annually.


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