The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Large-Cap Index Fund ETF Shares (VV) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VV is a Vanguard Large Blend fund. So, what’s the difference between VWO and VV? And which fund is better?
The expense ratio of VWO is 0.06 percentage points higher than VV’s (0.1% vs. 0.04%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than VV over the past ten years.
In this article, we’ll compare VWO vs. VV. We’ll look at fund composition and annual returns, as well as at their portfolio growth and performance. Moreover, I’ll also discuss VWO’s and VV’s holdings, industry exposure, and risk metrics and examine how these affect their overall returns.
Summary
| VWO | VV | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Vanguard Large-Cap Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Large Blend |
| Issuer | Vanguard | Vanguard |
| AUM | 117.28B | 37.65B |
| Avg. Return | 5.79% | 14.75% |
| Div. Yield | 1.98% | 1.26% |
| Expense Ratio | 0.1% | 0.04% |
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 Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.
VWO’s dividend yield is 0.72% higher than that of VV (1.98% vs. 1.26%). Also, VWO yielded on average 8.96% less per year over the past decade (5.79% vs. 14.75%). The expense ratio of VWO is 0.06 percentage points higher than VV’s (0.1% vs. 0.04%).
Fund Composition
Industry Exposure
| VWO | VV | |
| Technology | 17.06% | 25.38% |
| Industrials | 5.95% | 8.39% |
| Energy | 5.48% | 2.62% |
| Communication Services | 11.41% | 11.68% |
| Utilities | 2.55% | 2.35% |
| Healthcare | 5.33% | 13.22% |
| Consumer Defensive | 5.87% | 6.06% |
| Real Estate | 3.13% | 2.7% |
| Financial Services | 18.15% | 13.82% |
| Consumer Cyclical | 16.1% | 11.65% |
| Basic Materials | 8.98% | 2.13% |
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 Large-Cap Index Fund ETF Shares (VV) has the most exposure to the Technology sector at 25.38%. This is followed by Financial Services and Healthcare at 13.82% and 13.22% respectively. Utilities (2.35%), Energy (2.62%), and Real Estate (2.7%) only make up 7.67% of the fund’s total assets.
VV’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 6.06%, 8.39%, 11.65%, 11.68%, and 13.22%.
VWO is 4.33% more exposed to the Financial Services sector than VV (18.15% vs 13.82%). VWO’s exposure to Technology and Consumer Cyclical stocks is 8.32% lower and 4.45% higher respectively (17.06% vs. 25.38% and 16.1% vs. 11.65%). In total, Real Estate, Healthcare, and Energy also make up 4.60% less of the fund’s holdings compared to VV (13.94% vs. 18.54%).
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%.
| VV Holdings | Weight |
| Apple Inc | 5.7% |
| Microsoft Corp | 5.35% |
| Amazon.com Inc | 3.87% |
| Facebook Inc Class A | 2.19% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.81% |
| Tesla Inc | 1.37% |
| Berkshire Hathaway Inc Class B | 1.3% |
| NVIDIA Corp | 1.24% |
| JPMorgan Chase & Co | 1.24% |
VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.
Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.
Risk Analysis
| VWO | VV | |
| Mean Return | 0.45 | 1.24 |
| R-squared | 81.69 | 99.86 |
| Std. Deviation | 17.64 | 13.75 |
| Alpha | -1.36 | -0.08 |
| Beta | 1.06 | 1.01 |
| Sharpe Ratio | 0.27 | 1.04 |
| Treynor Ratio | 3.14 | 14.14 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Beta of 1.06 with a R-squared of 81.69 and a Mean Return of 0.45. Its Sharpe Ratio is 0.27 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a Alpha of -1.36 and a Standard Deviation of 17.64.
The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Standard Deviation of 13.75 with a Beta of 1.01 and a Mean Return of 1.24. Its Treynor Ratio is 14.14 while VV’s Alpha is -0.08. Furthermore, the fund has a R-squared of 99.86 and a Sharpe Ratio of 1.04.
VWO’s Mean Return is 0.79 points lower than that of VV and its R-squared is 18.17 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than VV. The Alpha and Beta of VWO are 1.28 points lower and 0.05 points higher than VV’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | VV |
| 2020 | 15.32% | 20.99% |
| 2019 | 20.4% | 31.39% |
| 2018 | -14.57% | -4.44% |
| 2017 | 31.38% | 22.03% |
| 2016 | 11.75% | 11.65% |
| 2015 | -15.35% | 1.07% |
| 2014 | 0.6% | 13.39% |
| 2013 | -5.0% | 32.65% |
| 2012 | 18.84% | 16.09% |
| 2011 | -18.68% | 1.58% |
| 2010 | 18.99% | 15.81% |
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 VV, returning 32.65% on an annual basis. The poorest year for VV in the last ten years was 2018, with a yield of -4.44%. Most years the Vanguard Large-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.39%, 15.81%, and 16.09% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| VV | $10,000 | $42,970 | 14.75% |
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 VV, the end total would have been $42,970. This equates to a $32,970 profit over 11 years and a compound annual growth rate (CAGR) of 14.75%.
VWO’s CAGR is 8.96 percentage points lower than that of VV and as a result, would have yielded $26,770 less on a $10,000 investment. Thus, VWO performed worse than VV by 8.96% annually.
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