The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VHT is a Vanguard Health fund. So, what’s the difference between VWO and VHT? And which fund is better?
VWO and VHT have the same expense ratio: 0.1%. VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than VHT over the past ten years.
In this article, we’ll compare VWO vs. VHT. We’ll look at risk metrics and portfolio growth, as well as at their fund composition and holdings. Moreover, I’ll also discuss VWO’s and VHT’s industry exposure, annual returns, and performance and examine how these affect their overall returns.
Summary
| VWO | VHT | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Vanguard Health Care Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Health |
| Issuer | Vanguard | Vanguard |
| AUM | 117.28B | 17.94B |
| Avg. Return | 5.79% | 16.04% |
| Div. Yield | 1.98% | 1.15% |
| Expense Ratio | 0.1% | 0.1% |
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
VWO’s dividend yield is 0.83% higher than that of VHT (1.98% vs. 1.15%). Also, VWO yielded on average 10.25% less per year over the past decade (5.79% vs. 16.04%). VWO and VHT have the same expense ratio: 0.1%.
Fund Composition
Industry Exposure
| VWO | VHT | |
| Technology | 17.06% | 0.05% |
| Industrials | 5.95% | 0.05% |
| Energy | 5.48% | 0.0% |
| Communication Services | 11.41% | 0.0% |
| Utilities | 2.55% | 0.0% |
| Healthcare | 5.33% | 99.57% |
| Consumer Defensive | 5.87% | 0.0% |
| Real Estate | 3.13% | 0.0% |
| Financial Services | 18.15% | 0.02% |
| Consumer Cyclical | 16.1% | 0.0% |
| Basic Materials | 8.98% | 0.31% |
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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
VWO is 18.13% more exposed to the Financial Services sector than VHT (18.15% vs 0.02%). VWO’s exposure to Technology and Consumer Cyclical stocks is 17.01% higher and 16.10% higher respectively (17.06% vs. 0.05% and 16.1% vs. 0.0%). In total, Real Estate, Healthcare, and Energy also make up 85.63% less of the fund’s holdings compared to VHT (13.94% vs. 99.57%).
Holdings
| VWO Holdings | Weight |
| Tencent Holdings Ltd | 5.29% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.73% |
| Taiwan Semiconductor Manufacturing Co Ltd | 4.58% |
| Meituan | 1.88% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 1.7% |
| Reliance Industries Ltd Shs Dematerialised | 1.06% |
| Naspers Ltd Class N | 1.01% |
| Vale SA | 0.92% |
| Infosys Ltd | 0.91% |
| 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%.
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
Risk Analysis
| VWO | VHT | |
| Mean Return | 0.45 | 1.33 |
| R-squared | 81.69 | 59.86 |
| Std. Deviation | 17.64 | 13.58 |
| Alpha | -1.36 | 7.99 |
| Beta | 1.06 | 0.75 |
| Sharpe Ratio | 0.27 | 1.13 |
| Treynor Ratio | 3.14 | 20.74 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Alpha of -1.36 with a Beta of 1.06 and a Standard Deviation of 17.64. Its Mean Return is 0.45 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Treynor Ratio of 3.14 and a R-squared of 81.69.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a Treynor Ratio of 20.74 and a Beta of 0.75. Its Alpha is 7.99 while VHT’s R-squared is 59.86. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Standard Deviation of 13.58.
VWO’s Mean Return is 0.88 points lower than that of VHT and its R-squared is 21.83 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than VHT. The Alpha and Beta of VWO are 9.35 points lower and 0.31 points higher than VHT’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | VHT |
| 2020 | 15.32% | 18.21% |
| 2019 | 20.4% | 21.97% |
| 2018 | -14.57% | 5.55% |
| 2017 | 31.38% | 23.34% |
| 2016 | 11.75% | -3.33% |
| 2015 | -15.35% | 7.22% |
| 2014 | 0.6% | 25.38% |
| 2013 | -5.0% | 42.67% |
| 2012 | 18.84% | 19.1% |
| 2011 | -18.68% | 10.57% |
| 2010 | 18.99% | 5.75% |
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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| VHT | $10,000 | $48,464 | 16.04% |
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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.
VWO’s CAGR is 10.25 percentage points lower than that of VHT and as a result, would have yielded $32,264 less on a $10,000 investment. Thus, VWO performed worse than VHT by 10.25% annually.
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