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VWO vs. VGK: What’s The Difference?

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

The expense ratio of VWO is 0.02 percentage points higher than VGK’s (0.1% vs. 0.08%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than VGK over the past ten years.

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

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Summary

VWOVGK
NameVanguard FTSE Emerging Markets Index Fund ETF SharesVanguard FTSE Europe Index Fund ETF Shares
CategoryDiversified Emerging MktsEurope Stock
IssuerVanguardVanguard
AUM117.28B25.7B
Avg. Return5.79%6.68%
Div. Yield1.98%2.52%
Expense Ratio0.1%0.08%

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 FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

VWO’s dividend yield is 0.54% lower than that of VGK (1.98% vs. 2.52%). Also, VWO yielded on average 0.89% less per year over the past decade (5.79% vs. 6.68%). The expense ratio of VWO is 0.02 percentage points higher than VGK’s (0.1% vs. 0.08%).

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Fund Composition

Industry Exposure

VWO vs. VGK - Industry Exposure

VWOVGK
Technology17.06%8.3%
Industrials5.95%15.58%
Energy5.48%4.3%
Communication Services11.41%5.09%
Utilities2.55%3.89%
Healthcare5.33%13.76%
Consumer Defensive5.87%11.39%
Real Estate3.13%2.57%
Financial Services18.15%15.85%
Consumer Cyclical16.1%11.6%
Basic Materials8.98%7.67%

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 FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

VWO is 2.30% more exposed to the Financial Services sector than VGK (18.15% vs 15.85%). VWO’s exposure to Technology and Consumer Cyclical stocks is 8.76% higher and 4.50% higher respectively (17.06% vs. 8.3% and 16.1% vs. 11.6%). In total, Real Estate, Healthcare, and Energy also make up 6.69% less of the fund’s holdings compared to VGK (13.94% vs. 20.63%).

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%.

VGK - Holdings

VGK HoldingsWeight
Nestle SA2.82%
ASML Holding NV2.2%
Roche Holding AG2.13%
LVMH Moet Hennessy Louis Vuitton SE1.58%
Novartis AG1.55%
AstraZeneca PLC1.27%
SAP SE1.25%
Unilever PLC1.23%
Novo Nordisk A/S B1.09%
Siemens AG0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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Risk Analysis

VWOVGK
Mean Return0.450.61
R-squared81.6992.76
Std. Deviation17.6416.65
Alpha-1.360.45
Beta1.061.06
Sharpe Ratio0.270.4
Treynor Ratio3.145.12

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Standard Deviation of 16.65 with a Alpha of 0.45 and a Mean Return of 0.61. Its Treynor Ratio is 5.12 while VGK’s Sharpe Ratio is 0.4. Furthermore, the fund has a Beta of 1.06 and a R-squared of 92.76.

VWO’s Mean Return is 0.16 points lower than that of VGK and its R-squared is 11.07 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than VGK. The Alpha and Beta of VWO are 1.81 points lower and 0.00 points lower than VGK’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. VGK - Annual Returns

YearVWOVGK
202015.32%6.5%
201920.4%24.26%
2018-14.57%-14.79%
201731.38%27.06%
201611.75%-0.59%
2015-15.35%-1.87%
20140.6%-6.56%
2013-5.0%24.93%
201218.84%21.01%
2011-18.68%-11.49%
201018.99%5.01%

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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

VWO vs. VGK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$16,2005.79%
VGK$10,000$18,3506.68%

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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

VWO’s CAGR is 0.89 percentage points lower than that of VGK and as a result, would have yielded $2,150 less on a $10,000 investment. Thus, VWO performed worse than VGK by 0.89% annually.


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