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VWO vs. USMV: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and USMV is a iShares Large Blend fund. So, what’s the difference between VWO and USMV? And which fund is better?

The expense ratio of VWO is 0.05 percentage points lower than USMV’s (0.1% vs. 0.15%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than USMV over the past ten years.

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

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Summary

VWOUSMV
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares MSCI USA Min Vol Factor ETF
CategoryDiversified Emerging MktsLarge Blend
IssuerVanguardiShares
AUM117.28B27.6B
Avg. Return5.79%13.89%
Div. Yield1.98%1.5%
Expense Ratio0.1%0.15%

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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VWO’s dividend yield is 0.48% higher than that of USMV (1.98% vs. 1.5%). Also, VWO yielded on average 8.10% less per year over the past decade (5.79% vs. 13.89%). The expense ratio of VWO is 0.05 percentage points lower than USMV’s (0.1% vs. 0.15%).

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Fund Composition

Industry Exposure

VWO vs. USMV - Industry Exposure

VWOUSMV
Technology17.06%20.53%
Industrials5.95%10.51%
Energy5.48%0.21%
Communication Services11.41%11.03%
Utilities2.55%6.93%
Healthcare5.33%18.42%
Consumer Defensive5.87%12.82%
Real Estate3.13%2.73%
Financial Services18.15%9.65%
Consumer Cyclical16.1%5.53%
Basic Materials8.98%1.65%

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 iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

VWO is 8.50% more exposed to the Financial Services sector than USMV (18.15% vs 9.65%). VWO’s exposure to Technology and Consumer Cyclical stocks is 3.47% lower and 10.57% higher respectively (17.06% vs. 20.53% and 16.1% vs. 5.53%). In total, Real Estate, Healthcare, and Energy also make up 7.42% less of the fund’s holdings compared to USMV (13.94% vs. 21.36%).

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%.

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

VWOUSMV
Mean Return0.450
R-squared81.690
Std. Deviation17.640
Alpha-1.360
Beta1.060
Sharpe Ratio0.270
Treynor Ratio3.140

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Treynor Ratio of 0 with a Mean Return of 0 and a R-squared of 0. Its Alpha is 0 while USMV’s Standard Deviation is 0. Furthermore, the fund has a Beta of 0 and a Sharpe Ratio of 0.

VWO’s Mean Return is 0.45 points higher than that of USMV and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than USMV. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than USMV’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. USMV - Annual Returns

YearVWOUSMV
202015.32%5.6%
201920.4%27.77%
2018-14.57%1.36%
201731.38%18.97%
201611.75%10.5%
2015-15.35%5.5%
20140.6%16.34%
2013-5.0%25.11%
201218.84%11.04%
2011-18.68%0.0%
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

VWO vs. USMV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$14,0885.79%
USMV$10,000$27,60713.89%

A $10,000 investment in VWO would have resulted in a final balance of $14,088. This is a profit of $4,088 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

VWO’s CAGR is 8.10 percentage points lower than that of USMV and as a result, would have yielded $13,519 less on a $10,000 investment. Thus, VWO performed worse than USMV by 8.10% annually.


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