The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between VB and VNQ? And which fund is better?
The expense ratio of VB is 0.07 percentage points lower than VNQ’s (0.05% vs. 0.12%). VB also has a higher exposure to the technology sector and a higher standard deviation. Overall, VB has provided higher returns than VNQ over the past ten years.
In this article, we’ll compare VB vs. VNQ. We’ll look at risk metrics and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss VB’s and VNQ’s portfolio growth, performance, and annual returns and examine how these affect their overall returns.
Summary
| VB | VNQ | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | Vanguard Real Estate Index Fund ETF Shares |
| Category | Small Blend | Real Estate |
| Issuer | Vanguard | Vanguard |
| AUM | 137.72B | 77.34B |
| Avg. Return | 14.25% | 11.05% |
| Div. Yield | 1.14% | 2.34% |
| Expense Ratio | 0.05% | 0.12% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% 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%.
VB’s dividend yield is 1.20% lower than that of VNQ (1.14% vs. 2.34%). Also, VB yielded on average 3.21% more per year over the past decade (14.25% vs. 11.05%). The expense ratio of VB is 0.07 percentage points lower than VNQ’s (0.05% vs. 0.12%).
Fund Composition
Industry Exposure
| VB | VNQ | |
| Technology | 16.85% | 0.0% |
| Industrials | 16.11% | 0.0% |
| Energy | 3.67% | 0.0% |
| Communication Services | 2.4% | 0.0% |
| Utilities | 2.19% | 0.0% |
| Healthcare | 14.34% | 0.0% |
| Consumer Defensive | 4.14% | 0.0% |
| Real Estate | 9.56% | 100.0% |
| Financial Services | 13.06% | 0.0% |
| Consumer Cyclical | 13.03% | 0.0% |
| Basic Materials | 4.63% | 0.0% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.
VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.
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%.
VB is 16.85% more exposed to the Technology sector than VNQ (16.85% vs 0.0%). VB’s exposure to Industrials and Healthcare stocks is 16.11% higher and 14.34% higher respectively (16.11% vs. 0.0% and 14.34% vs. 0.0%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.21% more of the fund’s holdings compared to VNQ (10.21% vs. 0.00%).
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| 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
| VB | VNQ | |
| Mean Return | 1.15 | 0.89 |
| R-squared | 85.03 | 44.4 |
| Std. Deviation | 17.82 | 16.13 |
| Alpha | -4.02 | 2.47 |
| Beta | 1.21 | 0.76 |
| Sharpe Ratio | 0.74 | 0.62 |
| Treynor Ratio | 10.15 | 11.9 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Treynor Ratio of 10.15 and a Beta of 1.21. Its Mean Return is 1.15 while VB’s R-squared is 85.03. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Alpha of -4.02.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Mean Return of 0.89 and a Treynor Ratio of 11.9. Its Alpha is 2.47 while VNQ’s Standard Deviation is 16.13. Furthermore, the fund has a Sharpe Ratio of 0.62 and a R-squared of 44.4.
VB’s Mean Return is 0.26 points higher than that of VNQ and its R-squared is 40.63 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than VNQ. The Alpha and Beta of VB are 6.49 points lower and 0.45 points higher than VNQ’s Alpha and Beta.
Performance
Annual Returns
| Year | VB | VNQ |
| 2020 | 19.08% | -4.72% |
| 2019 | 27.37% | 28.91% |
| 2018 | -9.3% | -5.95% |
| 2017 | 16.24% | 4.95% |
| 2016 | 18.31% | 8.53% |
| 2015 | -3.65% | 2.37% |
| 2014 | 7.51% | 30.29% |
| 2013 | 37.8% | 2.42% |
| 2012 | 18.22% | 17.67% |
| 2011 | -2.68% | 8.62% |
| 2010 | 27.89% | 28.44% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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 |
| VB | $10,000 | $39,734 | 14.25% |
| VNQ | $10,000 | $29,506 | 11.05% |
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
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%.
VB’s CAGR is 3.21 percentage points higher than that of VNQ and as a result, would have yielded $10,228 more on a $10,000 investment. Thus, VB outperformed VNQ by 3.21% annually.
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