The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VOE is a Vanguard Mid-Cap Value fund. So, what’s the difference between VWO and VOE? And which fund is better?
The expense ratio of VWO is 0.03 percentage points higher than VOE’s (0.1% vs. 0.07%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than VOE over the past ten years.
In this article, we’ll compare VWO vs. VOE. We’ll look at holdings and performance, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VWO’s and VOE’s industry exposure, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| VWO | VOE | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Vanguard Mid-Cap Value Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Mid-Cap Value |
| Issuer | Vanguard | Vanguard |
| AUM | 117.28B | 26.78B |
| Avg. Return | 5.79% | 12.52% |
| Div. Yield | 1.98% | 1.87% |
| Expense Ratio | 0.1% | 0.07% |
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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.
VWO’s dividend yield is 0.11% higher than that of VOE (1.98% vs. 1.87%). Also, VWO yielded on average 6.73% less per year over the past decade (5.79% vs. 12.52%). The expense ratio of VWO is 0.03 percentage points higher than VOE’s (0.1% vs. 0.07%).
Fund Composition
Industry Exposure
| VWO | VOE | |
| Technology | 17.06% | 9.85% |
| Industrials | 5.95% | 9.4% |
| Energy | 5.48% | 5.69% |
| Communication Services | 11.41% | 5.27% |
| Utilities | 2.55% | 10.93% |
| Healthcare | 5.33% | 7.04% |
| Consumer Defensive | 5.87% | 4.85% |
| Real Estate | 3.13% | 11.48% |
| Financial Services | 18.15% | 18.26% |
| Consumer Cyclical | 16.1% | 11.8% |
| Basic Materials | 8.98% | 5.44% |
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 Mid-Cap Value Index Fund ETF Shares (VOE) has the most exposure to the Financial Services sector at 18.26%. This is followed by Consumer Cyclical and Real Estate at 11.8% and 11.48% respectively. Communication Services (5.27%), Basic Materials (5.44%), and Energy (5.69%) only make up 16.40% of the fund’s total assets.
VOE’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Technology, Utilities, and Real Estate stocks at 7.04%, 9.4%, 9.85%, 10.93%, and 11.48%.
VWO is 0.11% less exposed to the Financial Services sector than VOE (18.15% vs 18.26%). VWO’s exposure to Technology and Consumer Cyclical stocks is 7.21% higher and 4.30% higher respectively (17.06% vs. 9.85% and 16.1% vs. 11.8%). In total, Real Estate, Healthcare, and Energy also make up 10.27% less of the fund’s holdings compared to VOE (13.94% vs. 24.21%).
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%.
| VOE Holdings | Weight |
| Carrier Global Corp Ordinary Shares | 1.28% |
| International Flavors & Fragrances Inc | 1.13% |
| Motorola Solutions Inc | 1.12% |
| Discover Financial Services | 1.09% |
| Welltower Inc | 1.05% |
| Corteva Inc | 0.99% |
| Valero Energy Corp | 0.97% |
| Corning Inc | 0.95% |
| Willis Towers Watson PLC | 0.9% |
| D.R. Horton Inc | 0.89% |
VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.
Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.
Risk Analysis
| VWO | VOE | |
| Mean Return | 0.45 | 1.05 |
| R-squared | 81.69 | 88.76 |
| Std. Deviation | 17.64 | 15.98 |
| Alpha | -1.36 | -3.77 |
| Beta | 1.06 | 1.11 |
| Sharpe Ratio | 0.27 | 0.75 |
| Treynor Ratio | 3.14 | 10.19 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Alpha of -1.36 with a R-squared of 81.69 and a Mean Return of 0.45. Its Beta is 1.06 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Treynor Ratio of 3.14 and a Standard Deviation of 17.64.
The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Alpha of -3.77 with a R-squared of 88.76 and a Treynor Ratio of 10.19. Its Sharpe Ratio is 0.75 while VOE’s Mean Return is 1.05. Furthermore, the fund has a Standard Deviation of 15.98 and a Beta of 1.11.
VWO’s Mean Return is 0.60 points lower than that of VOE and its R-squared is 7.07 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than VOE. The Alpha and Beta of VWO are 2.41 points higher and 0.05 points lower than VOE’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | VOE |
| 2020 | 15.32% | 2.5% |
| 2019 | 20.4% | 27.98% |
| 2018 | -14.57% | -12.41% |
| 2017 | 31.38% | 17.05% |
| 2016 | 11.75% | 15.26% |
| 2015 | -15.35% | -1.8% |
| 2014 | 0.6% | 13.98% |
| 2013 | -5.0% | 37.65% |
| 2012 | 18.84% | 16.04% |
| 2011 | -18.68% | -0.32% |
| 2010 | 18.99% | 21.83% |
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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| VOE | $10,000 | $33,655 | 12.52% |
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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.
VWO’s CAGR is 6.73 percentage points lower than that of VOE and as a result, would have yielded $17,455 less on a $10,000 investment. Thus, VWO performed worse than VOE by 6.73% annually.
