In the world of ETFs, choosing between global diversification and US market focus can be challenging. Whether you’re a seasoned investor or just starting, selecting the right ETF is crucial for your portfolio’s success.
Two popular ETFs from Vanguard often compared are VWCE (Vanguard FTSE All-World UCITS ETF) and VUAA (Vanguard S&P 500 UCITS ETF). Each has its strengths, but which one fits your investment strategy?
In this article, we’ll break down their key differences, performance data, and help you decide which ETF aligns with your financial goals. Let’s dive in!
Overview
| ETFs | VWCE | VUAA |
| Asset Manager | Vanguard | Vanguard |
| Replicated index | FTSE All-World index | S&P 500 Index |
| AUM (in billions) | EUR +12,50 B | EUR +13,50 B |
| Inception Date | 07/2019 | 05/2019 |
| Fund Currency | USD | USD |
| Replication | Physical | Physical |
| TER | 0.22% p.a. | 0.07% p.a. |
What are the VWCE and the VUAA?
VWCE
The VWCE ETF, whose full name is “Vanguard FTSE All-World UCITS ETF USD Accumulation”, replicates the FTSE All-World Index. It was launched in July 2019 and, as of September 2024, has Share Class Assets totalling ~$14 billion.
This ETF uses an optimized physical replication strategy, investing in a sample of the index’s securities. As of September 2024, VWCE contains approximately 3,700 stocks, covering both developed and emerging markets.
The cumulative return of VWCE since its inception in July 2019 has been +71.49% (September 2024).
VUAA
The VUAA ETF, or “Vanguard S&P 500 UCITS ETF USD Accumulation”, tracks the S&P 500 Index, offering exposure to the 500 largest companies in the United States. Launched in May 2019, it has Share Class Assets totalling ~$14 billion.
Like VWCE, VUAA uses physical replication, directly investing in the companies of the S&P 500 Index.
As of September 2024, the cumulative return for VUAA since its inception has been +89.45% (September 2024).
We now move on to the comparative study between VWCE and VUAA, in which we will take into account different aspects, namely:
| Performance: | Regarding the performance of the two funds, during the same period (from July 2019 to the present), the most profitable was the VUAA. |
| TER: | VUAA has a lower TER ratio. That makes it the cheapest fund. |
| Portfolio structure: | The style of the stocks is similar. However, the VWCE ETF has more presence in emerging markets, while the VUAA is solely concentrated in the USA |
IMPORTANT: Before starting the comparison, note that we are discussing two ETFs whose benchmarks differ. That is why we will not be able to point out a winner and a loser since it would be necessary for both funds to work on the same benchmark.
Geographic distribution
VWCE
For VWCE, the geographic allocation is led by the United States, accounting for 62.7% of the portfolio. Japan follows as the second-largest country with 6.0%. Other notable regions include the United Kingdom (3.7%), China (2.6%), and France (2.5%).
Below is VWCE’s top 10 geographic breakdown by percentage (factsheet):
VUAA
VUAA is entirely focused on the US market, tracking the S&P 500 Index, which includes 500 of the largest publicly traded companies in the United States.
As of September 2024, 100% of VUAA’s portfolio is allocated to US companies, offering no international exposure. Below is the geographic breakdown for VUAA (factsheet):
Sector diversification
Both VWCE and VUAA are diversified across a range of sectors, but there are notable differences in their allocations. Information Technology leads the way in both portfolios, but it plays a significantly larger role in VUAA due to its focus on the US market. Other sectors, such as Consumer Discretionary, and Industrials, show differing weightings between the two funds, reflecting their distinct geographic exposures.
Below is a breakdown of the sector allocations for VWCE and VUAA:
| Sector (weights) | VWCE | VUAA |
| Information Technology | 27.2% | 31.0% |
| Financials | 14.8% | 13.3% |
| Consumer Discretionary | 13.1% | 9.7% |
| Industrials | 12.9% | 8.5% |
| Health Care | 11.1% | 12.2% |
| Consumer Staples | 5.3% | 6.0% |
| Energy | 4.3% | 3.5% |
| Communication Services | 2.8% | 8.8% |
| Basic Materials | 3.2% | 2.2% |
| Utilities | 2.9% | 2.4% |
| Real Estate | 2.4% | 2.4% |
Note: The weights listed in the table refer to September 2024.
Portfolio structure
Regarding the number of holdings, VWCE offers a broader range, with around 3,700 stocks covering both developed and emerging markets. In contrast, VUAA includes approximately 500 stocks, focusing exclusively on large-cap companies in the US.
Although both funds are of similar age, VWCE holds a greater number of stocks due to its inclusion of emerging markets, which significantly increases the number of constituents in its portfolio compared to VUAA’s focus solely on the US market.
Top 10 holdings
| VWCE | VUAA | ||
| Stocks | Weights | Stocks | Weights |
| Apple Inc | 4.2% | Apple Inc | 6.9% |
| Microsoft Corp | 3.9% | Microsoft Corp | 6.5% |
| Nvidia Corp | 3.6% | Nvidia Corp | 6.2% |
| Alphabet Inc (Class A) | 2.2% | Alphabet Inc | 3.7% |
| Amazon.com Inc | 2.1% | Amazon.com Inc | 3.4% |
| Meta Platforms Inc | 1.4% | Meta Platforms Inc | 2.4% |
| Berkshire Hathaway Inc | 1.1% | Berkshire Hathaway Inc | 1.8% |
| Eli Lilly & Co | 1.0% | Eli Lilly & Co | 1.6% |
| Broadcom Inc | 0.9% | Broadcom Inc | 1.5% |
| Taiwan Semiconductor Manufacturing Co. Ltd. | 0.9% | JPMorgan Chase & Co | 1.4% |
Note: The weights listed in the table refer to September 2024.
Performance
Now, we can compare the performance of these two ETFs over the same period, starting from 2019, which is when both funds were launched. Despite their similar age, VUAA has delivered stronger returns than VWCE during this period, largely due to the robust performance of the US market compared to the more globally diversified exposure of VWCE.
In the chart, we can see that the performance of VUAA (in blue) surpasses that of VWCE (in orange). Over the same period (from 2019 to 2024), VUAA shows a return of 88.52%, while VWCE remains at 70.96%.
However, it’s important to remember that past performance does not guarantee future results, and these returns may not be sustained over time.
TER (Total Expense Ratio)
The TER represents the total cost of managing an ETF, and a lower TER generally means lower fees for investors.
In the case of VUAA, the TER is 0.07% p.a., whereas for VWCE, it is 0.22% p.a.. At first glance, VUAA appears more cost-effective due to its lower TER. However, it’s important to consider that the cost structure of each ETF is influenced by its specific investment strategy.
VUAA invests solely in large-cap US companies, where operational costs are generally lower and currency fluctuations are minimal. On the other hand, VWCE invests across both developed and emerging markets, which inherently involves higher fees due to the complexity of managing a globally diversified portfolio and dealing with multiple currencies.
Risk factors
While the VWCE and VUAA strategies offer a diversified way to invest, it’s important to understand the associated risks that could affect your investment.
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Market risk and global exposure
Both VWCE and VUAA are equity-focused, making them vulnerable to market volatility. If the stock markets experience a downturn, these ETFs are likely to incur losses as well. VUAA is more concentrated in the US market, which can lead to higher sensitivity to domestic economic shifts, while VWCE‘s global exposure provides broader risk distribution but may still suffer from global market downturns.
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Currency risk
Although VWCE and VUAA are both traded in EUR on European exchanges, their underlying assets are primarily denominated in USD. This means that fluctuations in the USD/EUR exchange rate can impact your returns. A weakening US dollar could diminish your gains when converting back to EUR, even if the ETFs themselves perform well.
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Inflexibility in asset allocation
With VWCE and VUAA, your investment is tied to their respective indices, which limits your ability to tailor your portfolio to specific regions or sectors. If you prefer more control over your investments, these ETFs may not provide the flexibility you need in terms of asset allocation.
Cheapest brokers to invest in VWCE and VUAA
Now that you know the key differences between VWCE and VUAA, it’s time to take the next step and choose the best broker to invest with. To help you make an informed decision, we’ve evaluated and highlighted 5 top European ETF brokers below, each offering unique benefits for different types of investors.
Here’s a look at the top five ETF brokers in Europe and why they might be the right fit for your investment journey:
| Broker | ETF Fees | Minimum deposit | Number of ETFs |
| eToro | $0 (other fees apply) | $50 (varies between countries) | 300+ |
| Interactive Brokers | Varies by exchange with tiered pricing: 0.05% of Trade Value (min: €1.25, max: €29.00) | €/$/£0 | 13,000+ |
| DEGIRO | £/€0 (in some ETFs, + a €/£1 handling fee), plus an annual £/€2.50 connectivity fee | €/£1 | 200+ |
| XTB | $/€/£0 | €/$/£1 | 100+ |
| Lightyear | No Lightyear execution fees for ETFs – other fees may apply) | €/$/£1 | 150+ |
Bottom line
In conclusion, both VWCE and VUAA are strong options for investors, but they cater to different investment goals. VWCE offers broad global diversification, including exposure to both developed and emerging markets. On the other hand, VUAA focuses exclusively on large-cap US companies, reflecting the strong performance of the US market.
VUAA has delivered higher returns, with +89.45% compared to VWCE’s +71.49% (from July 2019 to September 2024), making it the better option for those who prefer an investment strategy concentrated on the US market. However, if you’re looking for exposure to a more globally diversified portfolio, including emerging markets, VWCE might be the better choice.
Ultimately, the decision should align with your financial goals and risk tolerance.
If you need more guidance or have further questions, feel free to reach out to us. Best of luck on your investment journey!
