The Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) offers low-cost, targeted exposure to developing economies, whereas the State Street SPDR Portfolio MSCI Global Stock Market ETF (NYSEMKT:SPGM) serves as a diversified, global core equity holding.
Investors seeking international diversification often choose between targeted emerging-market funds and broad global equity trackers. While VWO targets growth in nations like China and Taiwan, SPGM offers a comprehensive solution for stocks across the globe, including the United States, established international markets, and emerging markets.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund remains one of the most affordable ways to access emerging markets with its 0.06% expense ratio. The State Street fund is also competitively priced at 0.09%, but offers a lower trailing distribution yield of 1.80% compared to VWO’s 2.40%.
Performance & risk comparison
What’s inside
State Street SPDR Portfolio MSCI Global Stock Market ETF holds 2,927 stocks, offering a wide-angle view of the global equity landscape. Its sector exposure is led by technology at 31.00%, followed by financial services at 16.00% and industrials at 13.00%. Its largest positions include Nvidia Corp (NASDAQ:NVDA) at 4.33%, Apple Inc (NASDAQ:AAPL) at 4.17%, and Microsoft Corp (NASDAQ:MSFT) at 2.40%. This fund was launched in 2012. State Street SPDR Portfolio MSCI Global Stock Market ETF has paid $1.54 per share over the trailing 12 months, which, at its recent ~$84.27 share price, yields 1.80%.
The Vanguard FTSE Emerging Markets ETF is geographically specific but numerically expansive, holding 5,942 positions across various developing nations. Technology is the primary sector at 34.00%, with financial services at 19.00% and consumer cyclical at 9.00% rounding out the top three. Its largest positions include Taiwan Semiconductor Manufacturing Co Ltd (TWSE:2330) at 15.69%, Tencent Holdings Ltd (SEHK:700) at 2.83%, and Alibaba Group Holding Ltd at 1.80%. It was launched in 2005. Vanguard FTSE Emerging Markets ETF has paid $1.38 per share over the trailing 12 months, which, at its recent ~$58.10 share price, yields 2.40%.
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Which is the better buy
The Vanguard FTSE Emerging Markets ETF (VWO) and the State Street SPDR Portfolio MSCI Global Stock Market ETF (SPGM) are both global exchange-traded funds (ETFs), however, they have employ different strategies. Investors considering these funds should understand these differences before deciding between them. Let’s have a closer look at how they compare.
First, there’s VWO. This fund is solely focused on emerging market stocks. VWO is one of the largest ETFs around, with over $122 billion in AUM, making it one of the 20 largest ETFs by AUM. As for holdings, the core of its positions is in the Asia Pacific region (76% of total holdings); Europe accounts for a much smaller share (12%), followed by the Americas (8%). Moving on to the country of origin, Taiwan (33%) leads, followed by China (22%) and India (16%). Turning to performance, VWO has delivered a total return of 110% over the last 10 years, equating to a compound annual growth rate (CAGR) of 7.7%. That’s far behind the S&P 500, which has generated a total return of 301%, with a CAGR of 14.9% over the same period. As for fees, the fund has a very affordable expense ratio of 0.06%.
Then, there’s SPGM. Unlike its counterpart, SPGM is designed to provide global exposure in an all-in-one package. Consequently, SPGM holds a large share of American stocks. Indeed, U.S. stocks make up an outright majority of its holdings (61% of total holdings). After the U.S., Japan is the next largest country of origin (6%), followed by the United Kingdom (3%). As for performance, SPGM has delivered a total return of 224% over the last 10 years, with a CAGR of 12.5%. Its expense ratio of 0.09% is quite low.
In summary, these funds are designed with two different strategic approaches in mind. SPGM’s approach may appeal to investors seeking a core holding for their portfolio, offering domestic and international exposure in a single ETF. VWO, on the other hand, is designed as an add-on ETF, providing investors with purely international exposure to diversify otherwise U.S.-centric portfolios.
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Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Tencent, and Vanguard FTSE Emerging Markets ETF. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
VWO vs SPGM: What Are the Key Differences Between These Two Popular ETFs? was originally published by The Motley Fool
