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VWO vs. MUB: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between VWO and MUB? And which fund is better?

The expense ratio of VWO is 0.03 percentage points higher than MUB’s (0.1% vs. 0.07%). VWO also has a high exposure to the financial services sector while MUB is mostly comprised of AA bonds. Overall, VWO has provided higher returns than MUB over the past ten years.

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

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Summary

VWOMUB
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares National Muni Bond ETF
CategoryDiversified Emerging MktsMuni National Interm
IssuerVanguardiShares
AUM117.28B22.71B
Avg. Return5.79%4.04%
Div. Yield1.98%1.96%
Expense Ratio0.1%0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

VWO’s dividend yield is 0.02% higher than that of MUB (1.98% vs. 1.96%). Also, VWO yielded on average 1.75% more per year over the past decade (5.79% vs. 4.04%). The expense ratio of VWO is 0.03 percentage points higher than MUB’s (0.1% vs. 0.07%).

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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%.

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

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Risk Analysis

VWOMUB
Mean Return0.450.32
R-squared81.6999
Std. Deviation17.643.68
Alpha-1.36-0.46
Beta1.061.01
Sharpe Ratio0.270.88
Treynor Ratio3.143.2

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Alpha of -1.36 with a Treynor Ratio of 3.14 and a Beta of 1.06. Its R-squared is 81.69 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Standard Deviation of 17.64 and a Mean Return of 0.45.

The iShares National Muni Bond ETF (MUB) has a Sharpe Ratio of 0.88 with a Alpha of -0.46 and a Mean Return of 0.32. Its R-squared is 99 while MUB’s Beta is 1.01. Furthermore, the fund has a Standard Deviation of 3.68 and a Treynor Ratio of 3.2.

VWO’s Mean Return is 0.13 points higher than that of MUB and its R-squared is 17.31 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than MUB. The Alpha and Beta of VWO are 0.90 points lower and 0.05 points higher than MUB’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. MUB - Annual Returns

YearVWOMUB
202015.32%4.87%
201920.4%7.28%
2018-14.57%0.86%
201731.38%4.61%
201611.75%0.06%
2015-15.35%2.99%
20140.6%8.61%
2013-5.0%-3.26%
201218.84%6.14%
2011-18.68%10.85%
201018.99%1.4%

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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

VWO vs. MUB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$16,2005.79%
MUB$10,000$15,3334.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

VWO’s CAGR is 1.75 percentage points higher than that of MUB and as a result, would have yielded $867 more on a $10,000 investment. Thus, VWO outperformed MUB by 1.75% annually.


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