The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between VWO and MDY? And which fund is better?
The expense ratio of VWO is 0.13 percentage points lower than MDY’s (0.1% vs. 0.23%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than MDY over the past ten years.
In this article, we’ll compare VWO vs. MDY. We’ll look at portfolio growth and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss VWO’s and MDY’s performance, risk metrics, and holdings and examine how these affect their overall returns.
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Summary
| VWO | MDY | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | SPDR S&P MIDCAP 400 ETF Trust |
| Category | Diversified Emerging Mkts | Mid-Cap Blend |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 117.28B | 21.31B |
| Avg. Return | 5.79% | 13.29% |
| Div. Yield | 1.98% | 0.94% |
| Expense Ratio | 0.1% | 0.23% |
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.
VWO’s dividend yield is 1.04% higher than that of MDY (1.98% vs. 0.94%). Also, VWO yielded on average 7.50% less per year over the past decade (5.79% vs. 13.29%). The expense ratio of VWO is 0.13 percentage points lower than MDY’s (0.1% vs. 0.23%).
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Fund Composition
Industry Exposure
| VWO | MDY | |
| Technology | 17.06% | 14.74% |
| Industrials | 5.95% | 17.88% |
| Energy | 5.48% | 2.52% |
| Communication Services | 11.41% | 1.63% |
| Utilities | 2.55% | 2.84% |
| Healthcare | 5.33% | 11.17% |
| Consumer Defensive | 5.87% | 4.2% |
| Real Estate | 3.13% | 9.66% |
| Financial Services | 18.15% | 15.2% |
| Consumer Cyclical | 16.1% | 14.89% |
| Basic Materials | 8.98% | 5.27% |
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.
MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.
VWO is 2.95% more exposed to the Financial Services sector than MDY (18.15% vs 15.2%). VWO’s exposure to Technology and Consumer Cyclical stocks is 2.32% higher and 1.21% higher respectively (17.06% vs. 14.74% and 16.1% vs. 14.89%). In total, Real Estate, Healthcare, and Energy also make up 9.41% less of the fund’s holdings compared to MDY (13.94% vs. 23.35%).
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%.
| MDY Holdings | Weight |
| Bio-Techne Corp | 0.75% |
| Molina Healthcare Inc | 0.63% |
| Cognex Corp | 0.63% |
| Fair Isaac Corp | 0.62% |
| XPO Logistics Inc | 0.61% |
| SolarEdge Technologies Inc | 0.61% |
| Signature Bank | 0.6% |
| Graco Inc | 0.55% |
| Camden Property Trust | 0.55% |
| FactSet Research Systems Inc | 0.54% |
MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.
SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.
Risk Analysis
| VWO | MDY | |
| Mean Return | 0.45 | 1.08 |
| R-squared | 81.69 | 86.66 |
| Std. Deviation | 17.64 | 16.83 |
| Alpha | -1.36 | -4.1 |
| Beta | 1.06 | 1.15 |
| Sharpe Ratio | 0.27 | 0.73 |
| Treynor Ratio | 3.14 | 9.97 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Standard Deviation of 17.64 with a Mean Return of 0.45 and a Beta of 1.06. Its Treynor Ratio is 3.14 while VWO’s Alpha is -1.36. Furthermore, the fund has a R-squared of 81.69 and a Sharpe Ratio of 0.27.
The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Alpha of -4.1 with a Treynor Ratio of 9.97 and a Beta of 1.15. Its Standard Deviation is 16.83 while MDY’s R-squared is 86.66. Furthermore, the fund has a Mean Return of 1.08 and a Sharpe Ratio of 0.73.
VWO’s Mean Return is 0.63 points lower than that of MDY and its R-squared is 4.97 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than MDY. The Alpha and Beta of VWO are 2.74 points higher and 0.09 points lower than MDY’s Alpha and Beta.
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Performance
Annual Returns
| Year | VWO | MDY |
| 2020 | 15.32% | 13.51% |
| 2019 | 20.4% | 25.86% |
| 2018 | -14.57% | -11.28% |
| 2017 | 31.38% | 15.89% |
| 2016 | 11.75% | 20.33% |
| 2015 | -15.35% | -2.4% |
| 2014 | 0.6% | 9.42% |
| 2013 | -5.0% | 33.08% |
| 2012 | 18.84% | 17.58% |
| 2011 | -18.68% | -1.99% |
| 2010 | 18.99% | 26.17% |
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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| MDY | $10,000 | $36,524 | 13.29% |
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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.
VWO’s CAGR is 7.50 percentage points lower than that of MDY and as a result, would have yielded $20,324 less on a $10,000 investment. Thus, VWO performed worse than MDY by 7.50% annually.
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