The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between VWO and VTIP? And which fund is better?
The expense ratio of VWO is 0.05 percentage points higher than VTIP’s (0.1% vs. 0.05%). VWO also has a high exposure to the financial services sector while VTIP is mostly comprised of AAA bonds. Overall, VWO has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare VWO vs. VTIP. We’ll look at fund composition and holdings, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss VWO’s and VTIP’s portfolio growth, risk metrics, and performance and examine how these affect their overall returns.
|Name||Vanguard FTSE Emerging Markets Index Fund ETF Shares||Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Inflation-Protected Bond|
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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
VWO’s dividend yield is 0.63% higher than that of VTIP (1.98% vs. 1.35%). Also, VWO yielded on average 4.00% more per year over the past decade (5.79% vs. 1.79%). The expense ratio of VWO is 0.05 percentage points higher than VTIP’s (0.1% vs. 0.05%).
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|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%.
|VTIP Bond Sectors||Weight|
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Alpha of -1.36 and a Beta of 1.06. Its Standard Deviation is 17.64 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a Sharpe Ratio of 0.27 and a R-squared of 81.69.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a R-squared of 0 with a Mean Return of 0 and a Beta of 0. Its Treynor Ratio is 0 while VTIP’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Standard Deviation of 0.
VWO’s Mean Return is 0.45 points higher than that of VTIP and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than VTIP. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than VTIP’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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VWO would have resulted in a final balance of $14,830. This is a profit of $4,830 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
VWO’s CAGR is 4.00 percentage points higher than that of VTIP and as a result, would have yielded $3,525 more on a $10,000 investment. Thus, VWO outperformed VTIP by 4.00% annually.
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