Does Vanguard or iShares Have the Better Emerging Markets ETF?
EEM posted the stronger one-year return, but its deeper five-year drawdown and steeper 0.72% fee tell a different story for long-term holders.
The Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM) are two prominent options for investors seeking exposure to high-growth emerging markets. VWO boasts a lower expense ratio and broader diversification, while EEM offers slightly tighter portfolio exposure. Both funds provide diversified baskets of equities from countries like China, Taiwan, and Brazil.
VWO features an expense ratio of just a small fraction of EEM's fee, making it more affordable for long-term investors. It also offers a slightly higher trailing dividend yield (2.1%) compared to EEM's 1.8%. VWO's portfolio consists of 6,507 holdings, with technology accounting for 34% of the assets, followed by financial services (20%) and consumer cyclical (9%). Its largest positions include Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, and Alibaba Group Holding Ltd.
On the other hand, EEM holds 1,182 stocks, with an aggressive tilt toward technology (42% of the assets), followed by financial services (21%) and consumer cyclicals (8%). Top holdings for EEM include Taiwan Semiconductor Manufacturing, Samsung Electronics Ltd, and Sk Hynix. EEM is also roughly evenly divided between emerging market and developed non-U.S. stocks, with more than 81% dedicated to Asian stocks.
When considering long-term returns, EEM outperforms VWO, with an annualized return of 21.2% over the past decade, compared to VWO's 16.7%. However, VWO's lower expense ratio and broader diversification make it a compelling choice for income-focused investors seeking exposure to emerging markets.
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