The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between VWO and SDY? And which fund is better?
The expense ratio of VWO is 0.25 percentage points lower than SDY’s (0.1% vs. 0.35%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than SDY over the past ten years.
In this article, we’ll compare VWO vs. SDY. We’ll look at risk metrics and fund composition, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss VWO’s and SDY’s industry exposure, annual returns, and performance and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||SPDR S&P Dividend ETF|
|Category||Diversified Emerging Mkts||Large Value|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Dividend ETF (SDY) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 19.67B total assets under management and has yielded an average annual return of 12.44% over the past 10 years. The fund has a dividend yield of 2.65% with an expense ratio of 0.35%.
VWO’s dividend yield is 0.67% lower than that of SDY (1.98% vs. 2.65%). Also, VWO yielded on average 6.65% less per year over the past decade (5.79% vs. 12.44%). The expense ratio of VWO is 0.25 percentage points lower than SDY’s (0.1% vs. 0.35%).
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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 Dividend ETF (SDY) has the most exposure to the Financial Services sector at 16.32%. This is followed by Industrials and Consumer Defensive at 15.89% and 14.01% respectively. Communication Services (4.64%), Energy (5.95%), and Basic Materials (6.45%) only make up 17.04% of the fund’s total assets.
SDY’s mid-section with moderate exposure is comprised of Real Estate, Healthcare, Consumer Cyclical, Utilities, and Consumer Defensive stocks at 6.57%, 7.35%, 8.68%, 12.14%, and 14.01%.
VWO is 1.83% more exposed to the Financial Services sector than SDY (18.15% vs 16.32%). VWO’s exposure to Technology and Consumer Cyclical stocks is 15.06% higher and 7.42% higher respectively (17.06% vs. 2.0% and 16.1% vs. 8.68%). In total, Real Estate, Healthcare, and Energy also make up 5.93% less of the fund’s holdings compared to SDY (13.94% vs. 19.87%).
|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%.
|Exxon Mobil Corp||2.81%|
|South Jersey Industries Inc||2.22%|
|International Business Machines Corp||2.0%|
|National Retail Properties Inc||1.86%|
|Federal Realty Investment Trust||1.77%|
|Realty Income Corp||1.7%|
|Old Republic International Corp||1.65%|
SDY’s Top Holdings are Exxon Mobil Corp, AT&T Inc, South Jersey Industries Inc, Chevron Corp, and International Business Machines Corp at 2.81%, 2.5%, 2.22%, 2.02%, and 2.0%.
AbbVie Inc (1.93%), National Retail Properties Inc (1.86%), and Federal Realty Investment Trust (1.77%) have a slightly smaller but still significant weight. Realty Income Corp and Old Republic International Corp are also represented in the SDY’s holdings at 1.7% and 1.65%.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Beta of 1.06 with a Standard Deviation of 17.64 and a Alpha of -1.36. Its Treynor Ratio is 3.14 while VWO’s Mean Return is 0.45. Furthermore, the fund has a R-squared of 81.69 and a Sharpe Ratio of 0.27.
The SPDR S&P Dividend ETF (SDY) has a Alpha of -0.1 with a Beta of 0.87 and a Treynor Ratio of 13.94. Its R-squared is 83.62 while SDY’s Sharpe Ratio is 0.95. Furthermore, the fund has a Mean Return of 1.07 and a Standard Deviation of 12.9.
VWO’s Mean Return is 0.62 points lower than that of SDY and its R-squared is 1.93 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than SDY. The Alpha and Beta of VWO are 1.26 points lower and 0.19 points higher than SDY’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 2013 was the strongest year for SDY, returning 30.09% on an annual basis. The poorest year for SDY in the last ten years was 2018, with a yield of -2.73%. Most years the SPDR S&P Dividend ETF has given investors modest returns, such as in 2012, 2014, and 2017, when gains were 11.51%, 13.8%, and 15.84% 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 SDY, the end total would have been $34,806. This equates to a $24,806 profit over 11 years and a compound annual growth rate (CAGR) of 12.44%.
VWO’s CAGR is 6.65 percentage points lower than that of SDY and as a result, would have yielded $18,606 less on a $10,000 investment. Thus, VWO performed worse than SDY by 6.65% annually.
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