The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between VWO and MBB? And which fund is better?
The expense ratio of VWO is 0.04 percentage points higher than MBB’s (0.1% vs. 0.06%). VWO also has a high exposure to the financial services sector while MBB is mostly comprised of AAA bonds. Overall, VWO has provided higher returns than MBB over the past ten years.
In this article, we’ll compare VWO vs. MBB. We’ll look at annual returns and holdings, as well as at their fund composition and performance. Moreover, I’ll also discuss VWO’s and MBB’s portfolio growth, risk metrics, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||iShares MBS ETF|
|Category||Diversified Emerging Mkts||Intermediate Government|
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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
VWO’s dividend yield is 0.10% higher than that of MBB (1.98% vs. 1.88%). Also, VWO yielded on average 2.71% more per year over the past decade (5.79% vs. 3.08%). The expense ratio of VWO is 0.04 percentage points higher than MBB’s (0.1% vs. 0.06%).
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|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%.
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Alpha of -1.36 and a R-squared of 81.69. Its Standard Deviation is 17.64 while VWO’s Beta is 1.06. Furthermore, the fund has a Treynor Ratio of 3.14 and a Sharpe Ratio of 0.27.
The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a Beta of 0.6 and a Alpha of 0.14. Its Sharpe Ratio is 0.87 while MBB’s Treynor Ratio is 3.02. Furthermore, the fund has a Standard Deviation of 2.12 and a R-squared of 74.38.
VWO’s Mean Return is 0.25 points higher than that of MBB and its R-squared is 7.31 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than MBB. The Alpha and Beta of VWO are 1.50 points lower and 0.46 points higher than MBB’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 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% 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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
VWO’s CAGR is 2.71 percentage points higher than that of MBB and as a result, would have yielded $2,294 more on a $10,000 investment. Thus, VWO outperformed MBB by 2.71% annually.
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