VYM vs. EEM: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VYM and EEM? And which fund is better?

The expense ratio of VYM is 0.62 percentage points lower than EEM’s (0.06% vs. 0.68%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided higher returns than EEM over the past ten years.

In this article, we’ll compare VYM vs. EEM. We’ll look at performance and industry exposure, as well as at their annual returns and fund composition. Moreover, I’ll also discuss VYM’s and EEM’s holdings, risk metrics, and portfolio growth and examine how these affect their overall returns.

Summary

VYM EEM
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares MSCI Emerging Markets ETF
Category Large Value Diversified Emerging Mkts
Issuer Vanguard iShares
AUM 48.5B 30.33B
Avg. Return 12.20% 5.47%
Div. Yield 2.79% 1.48%
Expense Ratio 0.06% 0.68%

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%.

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

VYM’s dividend yield is 1.31% higher than that of EEM (2.79% vs. 1.48%). Also, VYM yielded on average 6.73% more per year over the past decade (12.20% vs. 5.47%). The expense ratio of VYM is 0.62 percentage points lower than EEM’s (0.06% vs. 0.68%).

Fund Composition

Industry Exposure

VYM vs. EEM - Industry Exposure

VYM EEM
Technology 9.77% 21.36%
Industrials 10.14% 4.61%
Energy 7.12% 5.17%
Communication Services 5.91% 11.76%
Utilities 7.27% 1.99%
Healthcare 13.61% 5.06%
Consumer Defensive 14.13% 5.45%
Real Estate 0.02% 1.98%
Financial Services 22.05% 18.39%
Consumer Cyclical 5.57% 15.16%
Basic Materials 4.41% 9.07%

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%.

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

VYM is 3.66% more exposed to the Financial Services sector than EEM (22.05% vs 18.39%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 8.68% higher and 8.55% higher respectively (14.13% vs. 5.45% and 13.61% vs. 5.06%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 20.10% less of the fund’s holdings compared to EEM (15.89% vs. 35.99%).

Holdings

VYM - Holdings

VYM Holdings Weight
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%
Intel Corp 1.71%
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%.

EEM - Holdings

EEM Holdings Weight
Taiwan Semiconductor Manufacturing Co Ltd 6.36%
Alibaba Group Holding Ltd Ordinary Shares 4.58%
Tencent Holdings Ltd 4.41%
Samsung Electronics Co Ltd 4.05%
Meituan 1.24%
Vale SA 1.04%
Naspers Ltd Class N 1.04%
Reliance Industries Ltd Shs Dematerialised 0.97%
Infosys Ltd 0.92%
China Construction Bank Corp Class H 0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

Risk Analysis

VYM EEM
Mean Return 1.04 0.38
R-squared 88.88 83.5
Std. Deviation 12.69 17.79
Alpha -0.7 -2.33
Beta 0.88 1.08
Sharpe Ratio 0.93 0.22
Treynor Ratio 13.24 2.22

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Treynor Ratio of 13.24 with a Beta of 0.88 and a Alpha of -0.7. Its Mean Return is 1.04 while VYM’s Sharpe Ratio is 0.93. Furthermore, the fund has a Standard Deviation of 12.69 and a R-squared of 88.88.

The iShares MSCI Emerging Markets ETF (EEM) has a Sharpe Ratio of 0.22 with a Beta of 1.08 and a Alpha of -2.33. Its Treynor Ratio is 2.22 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Mean Return of 0.38 and a R-squared of 83.5.

VYM’s Mean Return is 0.66 points higher than that of EEM and its R-squared is 5.38 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than EEM. The Alpha and Beta of VYM are 1.63 points higher and 0.20 points lower than EEM’s Alpha and Beta.

Performance

Annual Returns

VYM vs. EEM - Annual Returns

Year VYM EEM
2020 1.14% 17.56%
2019 24.2% 17.67%
2018 -5.87% -14.98%
2017 16.42% 36.42%
2016 16.87% 10.51%
2015 0.33% -15.41%
2014 13.47% -2.82%
2013 30.26% -3.14%
2012 12.68% 17.32%
2011 10.5% -18.87%
2010 14.17% 15.93%

VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% respectively.

The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.

Portfolio Growth

VYM vs. EEM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
EEM $10,000 $15,578 5.47%

A $10,000 investment in VYM would have resulted in a final balance of $33,914. This is a profit of $23,914 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.

VYM’s CAGR is 6.73 percentage points higher than that of EEM and as a result, would have yielded $18,336 more on a $10,000 investment. Thus, VYM outperformed EEM by 6.73% annually.


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