VEE - ETF Overview
A Comprehensive Guide to the Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)
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Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) - Snapshot
Overview
The Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) is designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. This ETF offers exposure to a diverse array of large, mid, and small-cap stocks across more than 20 emerging markets, with the exclusion of South Korea, as it is classified as a developed market.
The FTSE Emerging Markets All Cap China A Inclusion Index measures the performance of emerging market stocks, including China A-shares, which are stocks of Chinese companies listed on the Shanghai and Shenzhen stock exchanges.
Investment Strategy
VEE adopts a market-cap-weighted strategy, investing in stocks in proportion to their market capitalization within the index. The goal of this approach is to reflect the market's collective valuation of each stock, thereby reducing turnover and trading expenses.
Top Holdings
VEE comprises more than 5,900 stocks, and its top 10 holdings represent approximately 20% of its total assets. The primary holding is the Vanguard Emerging Markets Stock Index Fund (VWO), the U.S. based ETF, constituting 100% of VEE's assets. Familiar names such as Alibaba, Tencent, and Taiwan Semiconductor are prominent holdings.
Sector Allocation
VEE's sector allocation is diversified across various sectors with a major focus on technology and financials.
Geographical Breakdown
Chinese stocks constitute over 28% of the ETF, followed by Indian equities.
Risk Level
MEDIUM-to-HIGH - due to its exposure to emerging markets, which can be more volatile and subject to geopolitical risks compared to developed markets.
Performance
Since its inception on November 30, 2011, VEE has provided an average annual return of 6.03%, including dividends.
Expense Ratio
The management expense ratio (MER) for VEE is 0.25%, which is among the lowest in its category. Vanguard Investments Canada Inc. has been absorbing or waiving certain fees to keep the expense ratio low.
This means that for every $1,000 invested, the annual cost would be $2.50.
Dividend Yield
The average dividend yield for VEE has been approximately 2.52% over the past five years. This yield reflects the income generated from the underlying stocks in the ETF's portfolio.
This means that if you invest $1,000 in this ETF, you can expect to receive approximately $25 in dividends over a year, assuming the yield remains constant.
Similar Alternatives
Here are some similar alternatives to the Vanguard FTSE Emerging Markets All Cap Index ETF (VEE):
BMO MSCI Emerging Markets Index ETF (ZEM): This ETF tracks the MSCI Emerging Markets Index, providing exposure to a broad range of emerging market stocks. It has a similar investment strategy to VEE, focusing on diversification across various emerging economies.
iShares Core MSCI Emerging Markets ETF (XEC): This ETF also follows the MSCI Emerging Markets Index, offering a diversified portfolio of stocks from emerging markets. It aims to provide investors with exposure to the growth potential of these markets.
iShares MSCI Emerging Markets ex China ETF (EMXC): This ETF excludes Chinese equities, focusing instead on other emerging markets. It can be a good option for investors looking to diversify away from China while still gaining exposure to emerging markets.
Vanguard Emerging Markets Stock Index Fund (VWO): This ETF also follows the FTSE Emerging Markets Index, offering a diversified portfolio of stocks from emerging markets. It aims to provide U.S. investors with the same exposure to the growth potential of these markets.
Here's a comparison of the expense ratios, yield, and performance of the VEE ETF and its close alternatives:
Target Investors
The Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) is designed for investors seeking broad exposure to emerging markets.
Target investors include:
Long-term investors looking for growth opportunities in emerging markets.
Diversified investors aiming to spread their investments across different regions and asset classes.
Cost-conscious investors who prefer low-cost index funds with broad diversification.
Retirement savers who want to include international equities in their retirement portfolios.
Reason to Invest…
Diversification: VEE provides exposure to a broad range of emerging markets, helping to diversify your portfolio and reduce country-specific risk.
Low Fees: With a management expense ratio (MER) of just 0.25%, VEE is a cost-effective way to invest in emerging markets.
Growth Potential: Emerging markets often offer higher growth potential compared to developed markets, which can lead to higher returns over the long term.
Extensive Holdings: VEE holds over 5,000 stocks, providing extensive diversification within the emerging markets space.
Quarterly Dividends: VEE pays quarterly dividends, providing a steady income stream for investors.
Reason Not to Invest…
Volatility: Emerging markets can be more volatile than developed markets, leading to larger price swings and potential losses.
Geopolitical Risks: Emerging markets are often subject to higher geopolitical risks, which can impact performance.
Country-Specific Risk: A significant portion of VEE's portfolio is invested in Chinese stocks, which can expose investors to country-specific risks.
Performance Variability: While VEE has performed well historically, past performance is not indicative of future results, and there can be periods of underperformance.
Limited Exposure to Developed Markets: Investors looking for a balanced portfolio may want to consider adding investments in developed markets to complement VEE.