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VWO vs. TQQQ: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between VWO and TQQQ? And which fund is better?

The expense ratio of VWO is 0.85 percentage points lower than TQQQ’s (0.1% vs. 0.95%). VWO also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than TQQQ over the past ten years.

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

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Summary

VWOTQQQ
NameVanguard FTSE Emerging Markets Index Fund ETF SharesProShares UltraPro QQQ
CategoryDiversified Emerging MktsTrading–Leveraged Equity
IssuerVanguardProShares
AUM117.28B12.41B
Avg. Return5.79%61.22%
Div. Yield1.98%0.0%
Expense Ratio0.1%0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

VWO’s dividend yield is 1.98% higher than that of TQQQ (1.98% vs. 0.0%). Also, VWO yielded on average 55.43% less per year over the past decade (5.79% vs. 61.22%). The expense ratio of VWO is 0.85 percentage points lower than TQQQ’s (0.1% vs. 0.95%).

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Fund Composition

Industry Exposure

VWO vs. TQQQ - Industry Exposure

VWOTQQQ
Technology17.06%0.0%
Industrials5.95%0.0%
Energy5.48%0.0%
Communication Services11.41%0.0%
Utilities2.55%0.0%
Healthcare5.33%0.0%
Consumer Defensive5.87%0.0%
Real Estate3.13%0.0%
Financial Services18.15%0.0%
Consumer Cyclical16.1%0.0%
Basic Materials8.98%0.0%

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 ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VWO is 18.15% more exposed to the Financial Services sector than TQQQ (18.15% vs 0.0%). VWO’s exposure to Technology and Consumer Cyclical stocks is 17.06% higher and 16.10% higher respectively (17.06% vs. 0.0% and 16.1% vs. 0.0%). In total, Real Estate, Healthcare, and Energy also make up 13.94% more of the fund’s holdings compared to TQQQ (13.94% vs. 0.00%).

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%.

TQQQ - Holdings

TQQQ HoldingsWeight
Nasdaq 100 Index Swap Goldman Sachs International45.11%
Nasdaq 100 Index Swap Societe Generale44.73%
Nasdaq 100 Index Swap Bnp Paribas38.05%
Nasdaq 100 Index Swap Bank Of America Na31.53%
Nasdaq 100 Index Swap Citibank Na31.49%
Nasdaq 100 Index Swap Jp Morgan Securities26.2%
Apple Inc7.49%
Microsoft Corp6.69%
Nasdaq 100 Index Swap Credit Suisse International5.9%
Amazon.com Inc5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

VWOTQQQ
Mean Return0.454.65
R-squared81.6983.64
Std. Deviation17.6450.08
Alpha-1.367.29
Beta1.063.37
Sharpe Ratio0.271.1
Treynor Ratio3.1415.65

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 Sharpe Ratio of 0.27. Its Alpha is -1.36 while VWO’s R-squared is 81.69. Furthermore, the fund has a Treynor Ratio of 3.14 and a Mean Return of 0.45.

The ProShares UltraPro QQQ (TQQQ) has a Alpha of 7.29 with a Treynor Ratio of 15.65 and a Sharpe Ratio of 1.1. Its Mean Return is 4.65 while TQQQ’s R-squared is 83.64. Furthermore, the fund has a Standard Deviation of 50.08 and a Beta of 3.37.

VWO’s Mean Return is 4.20 points lower than that of TQQQ and its R-squared is 1.95 points lower. With a Standard Deviation of 17.64, VWO is slightly less volatile than TQQQ. The Alpha and Beta of VWO are 8.65 points lower and 2.31 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. TQQQ - Annual Returns

YearVWOTQQQ
202015.32%109.85%
201920.4%133.93%
2018-14.57%-19.65%
201731.38%118.65%
201611.75%11.04%
2015-15.35%17.41%
20140.6%56.82%
2013-5.0%139.98%
201218.84%51.95%
2011-18.68%-7.77%
201018.99%0.0%

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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

VWO vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$13,6155.79%
TQQQ$10,000$593,01261.22%

A $10,000 investment in VWO would have resulted in a final balance of $13,615. This is a profit of $3,615 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

VWO’s CAGR is 55.43 percentage points lower than that of TQQQ and as a result, would have yielded $579,397 less on a $10,000 investment. Thus, VWO performed worse than TQQQ by 55.43% annually.


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