VWO vs. EEM: One Emerging Markets ETF Costs 10X More. Is It Worth It?
Key Points
Vanguard FTSE Emerging Markets ETF provides significantly lower costs with a 0.06% expense ratio compared to 0.72% for iShares MSCI Emerging Markets ETF.
iShares MSCI Emerging Markets ETF has more tech-heavy exposure than Vanguard FTSE Emerging Markets ETF.
Vanguard FTSE Emerging Markets ETF maintains much larger assets under management and a higher dividend yield.
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Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) provides a significantly lower expense ratio and higher dividend yield than iShares MSCI Emerging Markets ETF (NYSEMKT:EEM), which maintains a higher technology weighting.
Both funds provide exposure to developing economies but follow different index providers. While the iShares fund tracks the MSCI Emerging Markets Index, the Vanguard fund follows the FTSE Emerging Markets All Cap China A Inclusion Index, leading to meaningful differences in costs, risk profiles, and specific country weightings.
Snapshot (cost & size)
| Metric | EEM | VWO |
|---|---|---|
| Issuer | iShares | Vanguard |
| Expense ratio | 0.72% | 0.06% |
| 1-yr return (as of June 3, 2026) | 55.80% | 30.70% |
| Dividend yield | 1.80% | 2.80% |
| Beta | 0.72 | 0.59 |
| AUM | $31.2 billion | $159.9 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The cost difference is significant. The Vanguard fund is much more affordable with a 0.06% expense ratio, while the iShares fund charges 0.72%. Additionally, the Vanguard fund provides a higher payout for income-seeking investors.
Performance & risk comparison
| Metric | EEM | VWO |
|---|---|---|
| Max drawdown (5 yr) | (37.70%) | (32.60%) |
| Growth of $1,000 over 5 years (total return) | $1,403 | $1,287 |
What's inside
Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) includes 5,942 holdings and was launched in 2005. Its portfolio is weighted toward technology at 30%, financial services at 20%, and consumer cyclical at 11%. Its largest positions include Taiwan Semiconductor Manufacturing (TWSE:2330) at 14.09%, Tencent (HKG:0700) at 3.14%, and Alibaba Group (HKG:9988) at 2.46%. Over the trailing 12 months, the fund paid $1.71 per share in dividends.
In contrast, iShares MSCI Emerging Markets ETF (NYSEMKT:EEM) was launched in 2003 and has 1,232 holdings. Its sector exposure tilts heavily toward technology at 44%, followed by financial services at 18% and consumer cyclical at 8%. Top holdings include Taiwan Semiconductor Manufacturing Co. (TWSE:2330) at 14.74%, Samsung Electronics (KRX:005930) at 8.62%, and SK Hynix (KRX:000660) at 6.66%. It has a trailing-12-month dividend of $1.21 per share.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
With younger populations, faster-growing economies, and an expanding middle class across Asia, Latin America, and Africa, emerging markets offer some enticing opportunities to long-term investors. That growth potential comes with real complexity, though. And these widely held emerging markets funds don't even agree on which countries count as emerging.
Most striking is a classification quirk related to South Korea. EEM includes South Korea because MSCI classifies it as an emerging market, which is why Samsung sits among its largest holdings. VWO excludes South Korea entirely because FTSE considers it developed, so you won’t see Samsung in this fund. That distinction partly explains EEM's higher technology weighting and its stronger recent returns.
But EEM charges a remarkable 10 times what VWO does. That translates to roughly $65 more per year on a $10,000 investment, and over two decades of compounding it becomes a major drag on returns. VWO's dramatically lower cost, higher yield, and broader diversification across around 6,000 holdings make it the stronger long-term foundation for most buy-and-hold investors. Tactical traders and those who specifically want South Korea's technology companies in their emerging markets allocation will find what they need in EEM.
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Sara Appino has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing and Vanguard FTSE Emerging Markets ETF. The Motley Fool has a disclosure policy.
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