The iShares Russell 1000 Value ETF (IWD) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between IWD and VNQ? And which fund is better?
The expense ratio of IWD is 0.07 percentage points higher than VNQ’s (0.19% vs. 0.12%). IWD also has a higher exposure to the financial services sector and a lower standard deviation. Overall, IWD has provided higher returns than VNQ over the past ten years.
In this article, we’ll compare IWD vs. VNQ. We’ll look at fund composition and industry exposure, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss IWD’s and VNQ’s holdings, portfolio growth, and performance and examine how these affect their overall returns.
Summary
| IWD | VNQ | |
| Name | iShares Russell 1000 Value ETF | Vanguard Real Estate Index Fund ETF Shares |
| Category | Large Value | Real Estate |
| Issuer | iShares | Vanguard |
| AUM | 54.1B | 77.34B |
| Avg. Return | 11.40% | 11.05% |
| Div. Yield | 1.57% | 2.34% |
| Expense Ratio | 0.19% | 0.12% |
The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.
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%.
IWD’s dividend yield is 0.77% lower than that of VNQ (1.57% vs. 2.34%). Also, IWD yielded on average 0.35% more per year over the past decade (11.40% vs. 11.05%). The expense ratio of IWD is 0.07 percentage points higher than VNQ’s (0.19% vs. 0.12%).
Fund Composition
Industry Exposure
| IWD | VNQ | |
| Technology | 10.28% | 0.0% |
| Industrials | 11.77% | 0.0% |
| Energy | 4.76% | 0.0% |
| Communication Services | 8.67% | 0.0% |
| Utilities | 4.88% | 0.0% |
| Healthcare | 17.78% | 0.0% |
| Consumer Defensive | 7.76% | 0.0% |
| Real Estate | 4.94% | 100.0% |
| Financial Services | 20.43% | 0.0% |
| Consumer Cyclical | 5.62% | 0.0% |
| Basic Materials | 3.1% | 0.0% |
The iShares Russell 1000 Value ETF (IWD) has the most exposure to the Financial Services sector at 20.43%. This is followed by Healthcare and Industrials at 17.78% and 11.77% respectively. Energy (4.76%), Utilities (4.88%), and Real Estate (4.94%) only make up 14.58% of the fund’s total assets.
IWD’s mid-section with moderate exposure is comprised of Consumer Cyclical, Consumer Defensive, Communication Services, Technology, and Industrials stocks at 5.62%, 7.76%, 8.67%, 10.28%, and 11.77%.
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%.
IWD is 20.43% more exposed to the Financial Services sector than VNQ (20.43% vs 0.0%). IWD’s exposure to Healthcare and Industrials stocks is 17.78% higher and 11.77% higher respectively (17.78% vs. 0.0% and 11.77% vs. 0.0%). In total, Energy, Utilities, and Real Estate also make up 85.42% less of the fund’s holdings compared to VNQ (14.58% vs. 100.00%).
Holdings
| IWD Holdings | Weight |
| Berkshire Hathaway Inc Class B | 2.58% |
| JPMorgan Chase & Co | 2.25% |
| Johnson & Johnson | 2.24% |
| UnitedHealth Group Inc | 1.78% |
| Procter & Gamble Co | 1.71% |
| The Walt Disney Co | 1.5% |
| Bank of America Corp | 1.43% |
| Comcast Corp Class A | 1.33% |
| Exxon Mobil Corp | 1.2% |
| Pfizer Inc | 1.18% |
IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.
The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.
| 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%.
Risk Analysis
| IWD | VNQ | |
| Mean Return | 1.03 | 0.89 |
| R-squared | 92.38 | 44.4 |
| Std. Deviation | 14.35 | 16.13 |
| Alpha | -3.23 | 2.47 |
| Beta | 1.02 | 0.76 |
| Sharpe Ratio | 0.81 | 0.62 |
| Treynor Ratio | 11.06 | 11.9 |
The iShares Russell 1000 Value ETF (IWD) has a Mean Return of 1.03 with a Beta of 1.02 and a Alpha of -3.23. Its Standard Deviation is 14.35 while IWD’s Treynor Ratio is 11.06. Furthermore, the fund has a R-squared of 92.38 and a Sharpe Ratio of 0.81.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a R-squared of 44.4 with a Treynor Ratio of 11.9 and a Sharpe Ratio of 0.62. Its Mean Return is 0.89 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Beta of 0.76 and a Standard Deviation of 16.13.
IWD’s Mean Return is 0.14 points higher than that of VNQ and its R-squared is 47.98 points higher. With a Standard Deviation of 14.35, IWD is slightly less volatile than VNQ. The Alpha and Beta of IWD are 5.70 points lower and 0.26 points higher than VNQ’s Alpha and Beta.
Performance
Annual Returns
| Year | IWD | VNQ |
| 2020 | 2.67% | -4.72% |
| 2019 | 26.34% | 28.91% |
| 2018 | -8.4% | -5.95% |
| 2017 | 13.47% | 4.95% |
| 2016 | 17.09% | 8.53% |
| 2015 | -3.95% | 2.37% |
| 2014 | 13.21% | 30.29% |
| 2013 | 32.18% | 2.42% |
| 2012 | 17.28% | 17.67% |
| 2011 | 0.21% | 8.62% |
| 2010 | 15.3% | 28.44% |
IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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
| Fund | Initial Balance | Final Balance | CAGR |
| IWD | $10,000 | $30,746 | 11.40% |
| VNQ | $10,000 | $29,506 | 11.05% |
A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.
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%.
IWD’s CAGR is 0.35 percentage points higher than that of VNQ and as a result, would have yielded $1,240 more on a $10,000 investment. Thus, IWD outperformed VNQ by 0.35% annually.
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