The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IWB is a iShares Large Blend fund. So, what’s the difference between VWO and IWB? And which fund is better?
The expense ratio of VWO is 0.05 percentage points lower than IWB’s (0.1% vs. 0.15%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than IWB over the past ten years.
In this article, we’ll compare VWO vs. IWB. We’ll look at performance and fund composition, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VWO’s and IWB’s holdings, portfolio growth, and annual returns and examine how these affect their overall returns.
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Summary
| VWO | IWB | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | iShares Russell 1000 ETF |
| Category | Diversified Emerging Mkts | Large Blend |
| Issuer | Vanguard | iShares |
| AUM | 117.28B | 30.54B |
| Avg. Return | 5.79% | 14.64% |
| Div. Yield | 1.98% | 1.14% |
| Expense Ratio | 0.1% | 0.15% |
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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.
VWO’s dividend yield is 0.84% higher than that of IWB (1.98% vs. 1.14%). Also, VWO yielded on average 8.85% less per year over the past decade (5.79% vs. 14.64%). The expense ratio of VWO is 0.05 percentage points lower than IWB’s (0.1% vs. 0.15%).
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Fund Composition
Industry Exposure
| VWO | IWB | |
| Technology | 17.06% | 25.33% |
| Industrials | 5.95% | 8.88% |
| Energy | 5.48% | 2.44% |
| Communication Services | 11.41% | 10.83% |
| Utilities | 2.55% | 2.36% |
| Healthcare | 5.33% | 13.35% |
| Consumer Defensive | 5.87% | 5.97% |
| Real Estate | 3.13% | 3.34% |
| Financial Services | 18.15% | 13.64% |
| Consumer Cyclical | 16.1% | 11.85% |
| Basic Materials | 8.98% | 2.02% |
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 Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.
IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.
VWO is 4.51% more exposed to the Financial Services sector than IWB (18.15% vs 13.64%). VWO’s exposure to Technology and Consumer Cyclical stocks is 8.27% lower and 4.25% higher respectively (17.06% vs. 25.33% and 16.1% vs. 11.85%). In total, Real Estate, Healthcare, and Energy also make up 5.19% less of the fund’s holdings compared to IWB (13.94% vs. 19.13%).
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%.
| IWB Holdings | Weight |
| Apple Inc | 5.45% |
| Microsoft Corp | 5.11% |
| Amazon.com Inc | 3.43% |
| Facebook Inc Class A | 2.03% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.82% |
| Tesla Inc | 1.27% |
| Berkshire Hathaway Inc Class B | 1.24% |
| NVIDIA Corp | 1.11% |
| JPMorgan Chase & Co | 1.09% |
IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.
Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.
Risk Analysis
| VWO | IWB | |
| Mean Return | 0.45 | 1.27 |
| R-squared | 81.69 | 99.73 |
| Std. Deviation | 17.64 | 13.87 |
| Alpha | -1.36 | -0.38 |
| Beta | 1.06 | 1.02 |
| Sharpe Ratio | 0.27 | 1.05 |
| Treynor Ratio | 3.14 | 14.31 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a R-squared of 81.69 and a Treynor Ratio of 3.14. Its Alpha is -1.36 while VWO’s Beta is 1.06. Furthermore, the fund has a Standard Deviation of 17.64 and a Sharpe Ratio of 0.27.
The iShares Russell 1000 ETF (IWB) has a Sharpe Ratio of 1.05 with a Mean Return of 1.27 and a Beta of 1.02. Its Treynor Ratio is 14.31 while IWB’s R-squared is 99.73. Furthermore, the fund has a Alpha of -0.38 and a Standard Deviation of 13.87.
VWO’s Mean Return is 0.82 points lower than that of IWB and its R-squared is 18.04 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than IWB. The Alpha and Beta of VWO are 0.98 points lower and 0.04 points higher than IWB’s Alpha and Beta.
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Performance
Annual Returns
| Year | VWO | IWB |
| 2020 | 15.32% | 20.8% |
| 2019 | 20.4% | 31.26% |
| 2018 | -14.57% | -4.91% |
| 2017 | 31.38% | 21.53% |
| 2016 | 11.75% | 11.91% |
| 2015 | -15.35% | 0.82% |
| 2014 | 0.6% | 13.08% |
| 2013 | -5.0% | 32.93% |
| 2012 | 18.84% | 16.27% |
| 2011 | -18.68% | 1.36% |
| 2010 | 18.99% | 15.94% |
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 IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| IWB | $10,000 | $42,462 | 14.64% |
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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.
VWO’s CAGR is 8.85 percentage points lower than that of IWB and as a result, would have yielded $26,262 less on a $10,000 investment. Thus, VWO performed worse than IWB by 8.85% annually.
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