The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VYM is a Vanguard Large Value fund. So, what’s the difference between VWO and VYM? And which fund is better?
The expense ratio of VWO is 0.04 percentage points higher than VYM’s (0.1% vs. 0.06%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than VYM over the past ten years.
In this article, we’ll compare VWO vs. VYM. We’ll look at holdings and industry exposure, as well as at their performance and fund composition. Moreover, I’ll also discuss VWO’s and VYM’s risk metrics, portfolio growth, and annual returns and examine how these affect their overall returns.
|NameVanguard FTSE Emerging Markets Index Fund ETF SharesVanguard High Dividend Yield Index Fund ETF Shares|
|Category||Diversified Emerging Mkts||Large Value|
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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.
VWO’s dividend yield is 0.81% lower than that of VYM (1.98% vs. 2.79%). Also, VWO yielded on average 6.41% less per year over the past decade (5.79% vs. 12.20%). The expense ratio of VWO is 0.04 percentage points higher than VYM’s (0.1% vs. 0.06%).
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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 High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.
VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.
VWO is 3.90% less exposed to the Financial Services sector than VYM (18.15% vs 22.05%). VWO’s exposure to Technology and Consumer Cyclical stocks is 7.29% higher and 10.53% higher respectively (17.06% vs. 9.77% and 16.1% vs. 5.57%). In total, Real Estate, Healthcare, and Energy also make up 6.81% less of the fund’s holdings compared to VYM (13.94% vs. 20.75%).
|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%.
|JPMorgan Chase & Co||3.53%|
|Johnson & Johnson||3.28%|
|The Home Depot Inc||2.59%|
|Procter & Gamble Co||2.48%|
|Bank of America Corp||2.35%|
|Exxon Mobil Corp||2.02%|
|Comcast Corp Class A||1.96%|
|Verizon Communications Inc||1.75%|
|Cisco Systems Inc||1.69%|
VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.
Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.
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The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Sharpe Ratio of 0.27 and a R-squared of 81.69. Its Beta is 1.06 while VWO’s Standard Deviation is 17.64. Furthermore, the fund has a Treynor Ratio of 3.14 and a Alpha of -1.36.
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Sharpe Ratio of 0.93 with a Standard Deviation of 12.69 and a R-squared of 88.88. Its Beta is 0.88 while VYM’s Alpha is -0.7. Furthermore, the fund has a Treynor Ratio of 13.24 and a Mean Return of 1.04.
VWO’s Mean Return is 0.59 points lower than that of VYM and its R-squared is 7.19 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than VYM. The Alpha and Beta of VWO are 0.66 points lower and 0.18 points higher than VYM’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 2013 was the strongest year for VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.
VWO’s CAGR is 6.41 percentage points lower than that of VYM and as a result, would have yielded $17,714 less on a $10,000 investment. Thus, VWO performed worse than VYM by 6.41% annually.
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