The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between VWO and VBK? And which fund is better?
The expense ratio of VWO is 0.03 percentage points higher than VBK’s (0.1% vs. 0.07%). VWO also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than VBK over the past ten years.
In this article, we’ll compare VWO vs. VBK. We’ll look at performance and portfolio growth, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VWO’s and VBK’s holdings, annual returns, and fund composition and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||Vanguard Small-Cap Growth Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Small Growth|
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.
VWO’s dividend yield is 1.53% higher than that of VBK (1.98% vs. 0.45%). Also, VWO yielded on average 10.74% less per year over the past decade (5.79% vs. 16.53%). The expense ratio of VWO is 0.03 percentage points higher than VBK’s (0.1% vs. 0.07%).
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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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.
VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.
VWO is 14.10% more exposed to the Financial Services sector than VBK (18.15% vs 4.05%). VWO’s exposure to Technology and Consumer Cyclical stocks is 10.81% lower and 3.97% higher respectively (17.06% vs. 27.87% and 16.1% vs. 12.13%). In total, Real Estate, Healthcare, and Energy also make up 18.94% less of the fund’s holdings compared to VBK (13.94% vs. 32.88%).
|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%.
|Charles River Laboratories International Inc||0.78%|
|Fair Isaac Corp||0.57%|
|Bill.com Holdings Inc Ordinary Shares||0.56%|
VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.
Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Sharpe Ratio of 0.27 with a Standard Deviation of 17.64 and a Alpha of -1.36. Its R-squared is 81.69 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a Beta of 1.06 and a Mean Return of 0.45.
The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a R-squared of 80.56 with a Mean Return of 1.22 and a Sharpe Ratio of 0.78. Its Standard Deviation is 17.95 while VBK’s Alpha is -2.81. Furthermore, the fund has a Treynor Ratio of 11.18 and a Beta of 1.18.
VWO’s Mean Return is 0.77 points lower than that of VBK and its R-squared is 1.13 points higher. With a Standard Deviation of 17.64, VWO is slightly less volatile than VBK. The Alpha and Beta of VWO are 1.45 points higher and 0.12 points lower than VBK’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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% 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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.
VWO’s CAGR is 10.74 percentage points lower than that of VBK and as a result, would have yielded $32,439 less on a $10,000 investment. Thus, VWO performed worse than VBK by 10.74% annually.
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