Exchange-Traded Funds (ETFs) are an excellent tool for investors looking to achieve various investment goals. I have used several ETFs during my career in finance, and Vanguard has long been my favorite ETF provider.
The company is basically a non-profit asset management firm because it uses all its profits to lower fees for its investors.
Vanguard’s ETFs are the perfect example of how Vanguard has helped make investing much simpler for Canadians.
The Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) is one of the ETFs in the all-in-one Vanguard’s VGRO ETF portfolio. I will take a closer look at VEE to help you understand why I like this ETF so much.
Emerging Market ETF
Vanguard VEE is a low-fee solution to invest in emerging markets.
- It has a low-cost structure for investors
- Manages your funds to track the performance of emerging markets
- You don’t need to monitor individual equities
- Has a prolific performance over the years
- Has no exposure to fixed-income equities
- Not ideal for risk-averse investors in volatile markets
What is Vanguard FTSE Emerging Markets All Cap Index ETF
VEE is an ETF that seeks to track the performance of a broad emerging market index. Currently, it tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. VEE uses its fund to directly or indirectly invest in large-, mid-, and small-capitalization stocks of companies in the emerging market.
Vanguard introduced the ETF on November 30, 2011. It pays quarterly dividends to its investors and is managed by the Vanguard Equity Index Group. It has a fantastic track record for growth by tracking the emerging markets index. As of close July 31, 2020, its AUM is $1 billion.
This Vanguard ETF presents an excellent passive investing solution for investors who want to use the progress of various emerging markets to grow their wealth with low fees.
Due to its prolific performance, VEE is also a part of Vanguard’s VGRO All-In-One ETF Portfolio, an ETF portfolio with a focus on growth through almost 80% asset allocation towards equities. VEE itself is primarily geared towards international equities.
Features and Benefits of Vanguard FTSE Emerging Markets All Cap Index ETF
In this section of my VEE review, I will discuss the features and benefits of the ETF to help you understand it better, and whether it can be an asset that you should consider adding to your portfolio.
What are the investments inside VEE?
VEE is an ETF that primarily invests in international companies situated in emerging markets. Currently, it seeks to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. The FTSE Emerging MarkIndex is a market-cap weighted index. It represents the performance of large-, mid-, and small-market capitalization companies in various emerging markets.
The top holding for VEE is the Vanguard FTSE Emerging Markets ETF (VWO). VWO’s top holdings consist of:
- Alibaba Group Holding Ltd. (BABA:US) 6.46%
- Tencent Holdings Ltd. (HKG:700) 6.24%
- Taiwan Semiconductor Manufacturing Co. (TPE:2330) 2.90%
- Taiwan Semiconductor Manufacturing Co. (TSM:US) 1.57%
- Meituan Dianping (HK:3690) 1.36%
- Naspers Ltd. (NPN:SJ) 1.32%
- China Construction Bank Corp (HK:939) 1.27%
- Reliance Industries (IN:RIL) 1.21%
- Ping An Insurance Group (HK:2318) 0.92%
- JD.com Inc. (US:JD) 0.87%
Incorporated in the US, VWO’s holdings primarily consist of Chinese companies and other emerging markets, including Taiwan, India, Brazil, and others. It is a diversified mix of companies across various sectors that are performing well.
VEE Management Expense Ratio
VEE has a management fee of 0.23% and a management expense ratio of 0.24%. The MER is significantly lower than what you can get with a mutual fund product offered by large banks.
Despite its lower fees, it provides you with a passively managed index-sampling strategy to gain exposure to the stocks in the index.
As of July 31, 2020:
- 12-month trailing yield: 2.44%
- Distribution yield: 1.29%
- Dividend schedule: Quarterly
VEE has had a prolific performance since its inception in 2011, as the chart below shows.
If you consider its performance in terms of the growth of $10,000 invested in the ETF, it has seen exceptional growth. If you invested $10,000 in the ETF on its inception, it would be equal to $16,833 at the time of writing.
Who should buy VEE?
If you have faith in the progress of emerging markets and are willing to take on the risk of zero fixed-income assets, VEE could be an ideal ETF for you to consider. You will not need to worry about rebalancing anything. The ETF will manage the holdings in its portfolio to align with its goals to grow your investment.
I would recommend not investing too much into VEE because it is a very volatile fund. A range of between 2-10% of your overall portfolio should be enough to get the diversification you’re seeking.
How to Buy Vanguard VEE ETF
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I think Vanguard VEE is an excellent option for Canadian investors who want more exposure to international emerging markets without the risk of maintaining a portfolio of companies themselves. It allows you to passively invest a basket of companies in emerging markets without monitoring the account yourself.
There is a risk involved with zero exposure to fixed-income equities. Significant market volatility can result in drastic fluctuations in the price of the ETF. The recent market crash in March showed how drastically it could decline and recover.
Because of the riskiness of the fund, think of Vanguard VEE as the seasoning to your portfolio, and not the main course.
Investing does not have to be very complicated. Vanguard VEE shows you that it is not too challenging to find opportunities to help grow your account.