VWO vs. SPDW: How Does a Emerging Markets ETF Fair Against a Developed World Fund?

Both the Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) and SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) are broad international equity ETFs, but their focus differs by continent. This comparison explores fees, returns, risk, and portfolio makeup to help investors decide which best suits their goals.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

SPDW offers a lower expense ratio while maintaining a higher dividend yield and one-year return, giving it some advantages over VWO.

Performance & risk comparison

What's inside

The SPDR Portfolio Developed World ex-US ETF offers exposure to 2,413 companies across developed international markets, with financial services, industrials, and technology as its largest sectors. Its top holdings are Roche Holding AG (SIX:ROG.SW), Novartis AG (SIX:NOVN.SW), and Toyota Motor Corp (7203.T), each representing less than 2% of assets, which helps limit single-company risk.

By contrast, VWO tilts toward emerging markets, with substantial stakes in technology, financial services, and consumer cyclical sectors. Its largest positions are Taiwan Semiconductor Manufacturing Company Ltd. (2330.TW), Tencent Holdings Ltd. (0700.HK), and Alibaba Group Holding Ltd. (9988.HK), with Taiwan Semiconductor alone making up over 10% of assets. This concentration may introduce greater volatility than SPDW’s broader diversification.

What this means for investors

With both ETFs holding little to no U.S. stocks, investors based in the U.S. should be aware of the risks associated with investing in these ETFs compared to U.S.-centered funds.

International stocks can move very differently from American stocks and exhibit volatility that U.S. investors may not be used to, as those foreign stocks may move more closely in line with the relevant country’s economic and political structures and events.

The top five holdings of SPDW are European companies, while VWO’s holdings are primarily Asian companies. U.S. investors may want to keep an eye on relevant data and events in the relevant foreign country or continent to better understand the companies and the stock associated with each ETF.

For those who want an ETF with a more tech-focused exposure and TSMC leading the charge, VWO is ideal, while SPDW is a cheaper, more balanced ETF with a higher dividend yield.

Glossary

ETF (Exchange-traded fund): A fund holding many securities that trades on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
Emerging markets: Economies in earlier stages of development, often faster-growing but generally riskier than developed markets.
Developed markets: Economies with mature financial systems and higher income levels, such as Europe, Japan, and Canada.
Sector: A group of companies operating in the same part of the economy, like technology or financials.
Max drawdown: The largest peak-to-trough decline in an investment’s value over a specific period.
Growth of $1,000: Illustration showing how a $1,000 investment would have increased or decreased over time.
Beta: A measure of how much an investment’s price moves relative to the overall stock market.
AUM (Assets under management): The total market value of all assets managed within a fund.
Concentration risk: Risk that performance is heavily influenced by a few large holdings or sectors.
Diversification: Spreading investments across many securities to reduce the impact of any single holding.

For more guidance on ETF investing, check out the full guide at this link.

Adé Hennis has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard International Equity Index Funds - Vanguard Ftse Emerging Markets ETF. The Motley Fool has a disclosure policy.