The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IWN is a iShares Small Value fund. So, what’s the difference between VWO and IWN? And which fund is better?
The expense ratio of VWO is 0.14 percentage points lower than IWN’s (0.1% vs. 0.24%). VWO also has a lower exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than IWN over the past ten years.
In this article, we’ll compare VWO vs. IWN. We’ll look at portfolio growth and risk metrics, as well as at their performance and industry exposure. Moreover, I’ll also discuss VWO’s and IWN’s annual returns, fund composition, and holdings and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||iShares Russell 2000 Value ETF|
|Category||Diversified Emerging Mkts||Small Value|
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 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.
VWO’s dividend yield is 0.72% higher than that of IWN (1.98% vs. 1.26%). Also, VWO yielded on average 5.17% less per year over the past decade (5.79% vs. 10.96%). The expense ratio of VWO is 0.14 percentage points lower than IWN’s (0.1% vs. 0.24%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.
IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.
VWO is 4.82% less exposed to the Financial Services sector than IWN (18.15% vs 22.97%). VWO’s exposure to Technology and Consumer Cyclical stocks is 11.04% higher and 7.71% higher respectively (17.06% vs. 6.02% and 16.1% vs. 8.39%). In total, Real Estate, Healthcare, and Energy also make up 17.20% less of the fund’s holdings compared to IWN (13.94% vs. 31.14%).
|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%.
|AMC Entertainment Holdings Inc Class A||1.06%|
|Tenet Healthcare Corp||0.47%|
|Stag Industrial Inc||0.47%|
|EMCOR Group Inc||0.42%|
|Valley National Bancorp||0.37%|
|Chesapeake Energy Corp Ordinary Shares – New||0.37%|
|Agree Realty Corp||0.36%|
|Essent Group Ltd||0.35%|
IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.
Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Alpha of -1.36 with a Standard Deviation of 17.64 and a Mean Return of 0.45. Its R-squared is 81.69 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a Sharpe Ratio of 0.27 and a Beta of 1.06.
The iShares Russell 2000 Value ETF (IWN) has a Mean Return of 1.01 with a Standard Deviation of 19.28 and a Sharpe Ratio of 0.59. Its Alpha is -6.32 while IWN’s Treynor Ratio is 8.3. Furthermore, the fund has a Beta of 1.21 and a R-squared of 72.64.
VWO’s Mean Return is 0.56 points lower than that of IWN and its R-squared is 9.05 points higher. With a Standard Deviation of 17.64, VWO is slightly less volatile than IWN. The Alpha and Beta of VWO are 4.96 points higher and 0.15 points lower than IWN’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% 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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.
VWO’s CAGR is 5.17 percentage points lower than that of IWN and as a result, would have yielded $11,989 less on a $10,000 investment. Thus, VWO performed worse than IWN by 5.17% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.