The Vanguard 500 Index Fund (Admiral Shares) (symbol VEMAX) and the Vanguard S&P 500 ETF (symbol VWO) are two of the largest and most popular emerging markets funds. Some compare VEMAX vs VWO not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VEMAX and VWO are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VEMAX and VWO are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VEMAX vs VWO

VWO was launched on March 4, 2005, and VEMAX was launched the following year on June 23, 2006. Since that time, performance has been identical: 4.49% vs 4.51% annually. Despite changes in fees and expenses over this time period, the cumulative difference in performance over that time period is less than half a percent! Looking at the chart of VEMAX vs VWO below, it is obvious that they are identical.

Differences Between VEMAX and VWO

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VEMAX or VWO. However, only VWO is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for VWO and individual investor trades will not generally be large enough to “move” the market. In the case of VWO, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VWO is able to extend its tax benefits to VEMAX.

VEMAX has never paid a capital gain distribution! I noticed some posts on the internet saying that VWO is more tax-efficient than VEMAX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VEMAX. If all ETFs, I might lean more towards VWO.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”


VEMAX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VWO is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VEMAX vs VWO

VEMAX and VWO are literally the same. However, investors should consider the above factors when deciding which one is best for them.

Further Reading

Investors interested in reading about the VEMAX and VWO’s developed markets counterparts can read our comparison of VTMGX vs VEA.

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