The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Extended Market Index Fund ETF Shares (VXF) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VXF is a Vanguard Mid-Cap Growth fund. So, what’s the difference between VWO and VXF? And which fund is better?
The expense ratio of VWO is 0.04 percentage points higher than VXF’s (0.1% vs. 0.06%). VWO also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than VXF over the past ten years.
In this article, we’ll compare VWO vs. VXF. We’ll look at annual returns and portfolio growth, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VWO’s and VXF’s performance, fund composition, and holdings and examine how these affect their overall returns.
Summary
| VWO | VXF | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Vanguard Extended Market Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Mid-Cap Growth |
| Issuer | Vanguard | Vanguard |
| AUM | 117.28B | 114.53B |
| Avg. Return | 5.79% | 15.47% |
| Div. Yield | 1.98% | 1.19% |
| Expense Ratio | 0.1% | 0.06% |
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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.
VWO’s dividend yield is 0.79% higher than that of VXF (1.98% vs. 1.19%). Also, VWO yielded on average 9.68% less per year over the past decade (5.79% vs. 15.47%). The expense ratio of VWO is 0.04 percentage points higher than VXF’s (0.1% vs. 0.06%).
Fund Composition
Industry Exposure
| VWO | VXF | |
| Technology | 17.06% | 23.61% |
| Industrials | 5.95% | 11.31% |
| Energy | 5.48% | 2.46% |
| Communication Services | 11.41% | 7.29% |
| Utilities | 2.55% | 1.65% |
| Healthcare | 5.33% | 15.25% |
| Consumer Defensive | 5.87% | 3.09% |
| Real Estate | 3.13% | 8.16% |
| Financial Services | 18.15% | 12.56% |
| Consumer Cyclical | 16.1% | 11.35% |
| Basic Materials | 8.98% | 3.26% |
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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.
VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.
VWO is 5.59% more exposed to the Financial Services sector than VXF (18.15% vs 12.56%). VWO’s exposure to Technology and Consumer Cyclical stocks is 6.55% lower and 4.75% higher respectively (17.06% vs. 23.61% and 16.1% vs. 11.35%). In total, Real Estate, Healthcare, and Energy also make up 11.93% less of the fund’s holdings compared to VXF (13.94% vs. 25.87%).
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%.
| VXF Holdings | Weight |
| Square Inc A | 1.2% |
| Zoom Video Communications Inc | 1.04% |
| Uber Technologies Inc | 0.93% |
| Moderna Inc | 0.9% |
| Blackstone Group Inc | 0.83% |
| Snap Inc Class A | 0.8% |
| Twilio Inc A | 0.73% |
| DocuSign Inc | 0.68% |
| CrowdStrike Holdings Inc Class A | 0.63% |
| Marvell Technology Inc | 0.6% |
VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.
Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.
Risk Analysis
| VWO | VXF | |
| Mean Return | 0.45 | 1.24 |
| R-squared | 81.69 | 85.73 |
| Std. Deviation | 17.64 | 18.04 |
| Alpha | -1.36 | -3.26 |
| Beta | 1.06 | 1.23 |
| Sharpe Ratio | 0.27 | 0.79 |
| Treynor Ratio | 3.14 | 10.92 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a R-squared of 81.69 with a Standard Deviation of 17.64 and a Sharpe Ratio of 0.27. Its Beta is 1.06 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 Extended Market Index Fund ETF Shares (VXF) has a Beta of 1.23 with a R-squared of 85.73 and a Sharpe Ratio of 0.79. Its Alpha is -3.26 while VXF’s Mean Return is 1.24. Furthermore, the fund has a Treynor Ratio of 10.92 and a Standard Deviation of 18.04.
VWO’s Mean Return is 0.79 points lower than that of VXF and its R-squared is 4.04 points lower. With a Standard Deviation of 17.64, VWO is slightly less volatile than VXF. The Alpha and Beta of VWO are 1.90 points higher and 0.17 points lower than VXF’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | VXF |
| 2020 | 15.32% | 32.19% |
| 2019 | 20.4% | 28.04% |
| 2018 | -14.57% | -9.37% |
| 2017 | 31.38% | 18.1% |
| 2016 | 11.75% | 16.16% |
| 2015 | -15.35% | -3.26% |
| 2014 | 0.6% | 7.55% |
| 2013 | -5.0% | 38.37% |
| 2012 | 18.84% | 18.48% |
| 2011 | -18.68% | -3.61% |
| 2010 | 18.99% | 27.55% |
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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| VXF | $10,000 | $44,130 | 15.47% |
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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.
VWO’s CAGR is 9.68 percentage points lower than that of VXF and as a result, would have yielded $27,930 less on a $10,000 investment. Thus, VWO performed worse than VXF by 9.68% annually.
