IJH vs. VNQ: What’s The Difference?

The iShares Core S&P Mid-Cap ETF (IJH) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. IJH is a iShares Mid-Cap Blend fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between IJH and VNQ? And which fund is better?

The expense ratio of IJH is 0.07 percentage points lower than VNQ’s (0.05% vs. 0.12%). IJH also has a higher exposure to the industrials sector and a higher standard deviation. Overall, IJH has provided higher returns than VNQ over the past ten years.

In this article, we’ll compare IJH vs. VNQ. We’ll look at industry exposure and portfolio growth, as well as at their fund composition and holdings. Moreover, I’ll also discuss IJH’s and VNQ’s annual returns, performance, and risk metrics and examine how these affect their overall returns.

Summary

IJH VNQ
Name iShares Core S&P Mid-Cap ETF Vanguard Real Estate Index Fund ETF Shares
Category Mid-Cap Blend Real Estate
Issuer iShares Vanguard
AUM 63.4B 77.34B
Avg. Return 13.50% 11.05%
Div. Yield 1.07% 2.34%
Expense Ratio 0.05% 0.12%

The iShares Core S&P Mid-Cap ETF (IJH) is a Mid-Cap Blend fund that is issued by iShares. It currently has 63.4B total assets under management and has yielded an average annual return of 13.50% over the past 10 years. The fund has a dividend yield of 1.07% with an expense ratio of 0.05%.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.

IJH’s dividend yield is 1.27% lower than that of VNQ (1.07% vs. 2.34%). Also, IJH yielded on average 2.45% more per year over the past decade (13.50% vs. 11.05%). The expense ratio of IJH is 0.07 percentage points lower than VNQ’s (0.05% vs. 0.12%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

IJH vs. VNQ - Industry Exposure

IJH VNQ
Technology 14.81% 0.0%
Industrials 18.09% 0.0%
Energy 2.5% 0.0%
Communication Services 1.57% 0.0%
Utilities 2.9% 0.0%
Healthcare 10.89% 0.0%
Consumer Defensive 4.02% 0.0%
Real Estate 10.04% 100.0%
Financial Services 14.85% 0.0%
Consumer Cyclical 14.91% 0.0%
Basic Materials 5.42% 0.0%

The iShares Core S&P Mid-Cap ETF (IJH) has the most exposure to the Industrials sector at 18.09%. This is followed by Consumer Cyclical and Financial Services at 14.91% and 14.85% respectively. Energy (2.5%), Utilities (2.9%), and Consumer Defensive (4.02%) only make up 9.42% of the fund’s total assets.

IJH’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Financial Services stocks at 5.42%, 10.04%, 10.89%, 14.81%, and 14.85%.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VNQ’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

IJH is 18.09% more exposed to the Industrials sector than VNQ (18.09% vs 0.0%). IJH’s exposure to Consumer Cyclical and Financial Services stocks is 14.91% higher and 14.85% higher respectively (14.91% vs. 0.0% and 14.85% vs. 0.0%). In total, Energy, Utilities, and Consumer Defensive also make up 9.42% more of the fund’s holdings compared to VNQ (9.42% vs. 0.00%).

Holdings

IJH - Holdings

IJH Holdings Weight
Bio-Techne Corp 0.8%
Molina Healthcare Inc 0.68%
Cognex Corp 0.68%
Fair Isaac Corp 0.64%
Camden Property Trust 0.62%
XPO Logistics Inc 0.6%
Masimo Corp 0.59%
SolarEdge Technologies Inc 0.57%
FactSet Research Systems Inc 0.57%
Graco Inc 0.56%

IJH’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and Camden Property Trust at 0.8%, 0.68%, 0.68%, 0.64%, and 0.62%.

XPO Logistics Inc (0.6%), Masimo Corp (0.59%), and SolarEdge Technologies Inc (0.57%) have a slightly smaller but still significant weight. FactSet Research Systems Inc and Graco Inc are also represented in the IJH’s holdings at 0.57% and 0.56%.

VNQ - Holdings

VNQ Holdings Weight
Vanguard Real Estate II Index 11.62%
American Tower Corp 7.24%
Prologis Inc 5.33%
Crown Castle International Corp 5.01%
Equinix Inc 4.3%
Public Storage 2.85%
Simon Property Group Inc 2.52%
Digital Realty Trust Inc 2.49%
SBA Communications Corp 2.1%
Welltower Inc 2.09%

VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.

Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

IJH VNQ
Mean Return 1.13 0.89
R-squared 86.39 44.4
Std. Deviation 16.8 16.13
Alpha -4.01 2.47
Beta 1.15 0.76
Sharpe Ratio 0.77 0.62
Treynor Ratio 10.55 11.9

The iShares Core S&P Mid-Cap ETF (IJH) has a Treynor Ratio of 10.55 with a Beta of 1.15 and a Mean Return of 1.13. Its Alpha is -4.01 while IJH’s R-squared is 86.39. Furthermore, the fund has a Standard Deviation of 16.8 and a Sharpe Ratio of 0.77.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Mean Return of 0.89 with a Treynor Ratio of 11.9 and a Sharpe Ratio of 0.62. Its R-squared is 44.4 while VNQ’s Standard Deviation is 16.13. Furthermore, the fund has a Alpha of 2.47 and a Beta of 0.76.

IJH’s Mean Return is 0.24 points higher than that of VNQ and its R-squared is 41.99 points higher. With a Standard Deviation of 16.8, IJH is slightly more volatile than VNQ. The Alpha and Beta of IJH are 6.48 points lower and 0.39 points higher than VNQ’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

IJH vs. VNQ - Annual Returns

Year IJH VNQ
2020 13.61% -4.72%
2019 26.14% 28.91%
2018 -11.14% -5.95%
2017 16.19% 4.95%
2016 20.63% 8.53%
2015 -2.23% 2.37%
2014 9.64% 30.29%
2013 33.4% 2.42%
2012 17.76% 17.67%
2011 -1.89% 8.62%
2010 26.38% 28.44%

IJH had its best year in 2013 with an annual return of 33.4%. IJH’s worst year over the past decade yielded -11.14% and occurred in 2018. In most years the iShares Core S&P Mid-Cap ETF provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 13.61%, 16.19%, and 17.76% respectively.

The year 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.

Portfolio Growth

IJH vs. VNQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IJH $10,000 $37,266 13.50%
VNQ $10,000 $29,506 11.05%

A $10,000 investment in IJH would have resulted in a final balance of $37,266. This is a profit of $27,266 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.50%.

With a $10,000 investment in VNQ, the end total would have been $29,506. This equates to a $19,506 profit over 11 years and a compound annual growth rate (CAGR) of 11.05%.

IJH’s CAGR is 2.45 percentage points higher than that of VNQ and as a result, would have yielded $7,760 more on a $10,000 investment. Thus, IJH outperformed VNQ by 2.45% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply