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VGT vs. VNQ: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between VGT and VNQ? And which fund is better?

The expense ratio of VGT is 0.02 percentage points lower than VNQ’s (0.1% vs. 0.12%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided higher returns than VNQ over the past ten years.

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

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Summary

VGTVNQ
NameVanguard Information Technology Index Fund ETF SharesVanguard Real Estate Index Fund ETF Shares
CategoryTechnologyReal Estate
IssuerVanguardVanguard
AUM54.13B77.34B
Avg. Return20.84%11.05%
Div. Yield0.66%2.34%
Expense Ratio0.1%0.12%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

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%.

VGT’s dividend yield is 1.68% lower than that of VNQ (0.66% vs. 2.34%). Also, VGT yielded on average 9.79% more per year over the past decade (20.84% vs. 11.05%). The expense ratio of VGT is 0.02 percentage points lower than VNQ’s (0.1% vs. 0.12%).

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Fund Composition

Industry Exposure

VGT vs. VNQ - Industry Exposure

VGTVNQ
Technology88.89%0.0%
Industrials1.67%0.0%
Energy0.0%0.0%
Communication Services0.61%0.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%0.0%
Real Estate0.0%100.0%
Financial Services8.83%0.0%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.0%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

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%.

VGT is 88.89% more exposed to the Technology sector than VNQ (88.89% vs 0.0%). VGT’s exposure to Financial Services and Industrials stocks is 8.83% higher and 1.67% higher respectively (8.83% vs. 0.0% and 1.67% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 100.00% less of the fund’s holdings compared to VNQ (0.00% vs. 100.00%).

Holdings

VGT - Holdings

VGT HoldingsWeight
Apple Inc19.58%
Microsoft Corp16.53%
NVIDIA Corp4.22%
Visa Inc Class A3.16%
PayPal Holdings Inc2.76%
Mastercard Inc Class A2.76%
Adobe Inc2.39%
Intel Corp1.94%
Salesforce.com Inc1.91%
Cisco Systems Inc1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

VNQ - Holdings

VNQ HoldingsWeight
Vanguard Real Estate II Index11.62%
American Tower Corp7.24%
Prologis Inc5.33%
Crown Castle International Corp5.01%
Equinix Inc4.3%
Public Storage2.85%
Simon Property Group Inc2.52%
Digital Realty Trust Inc2.49%
SBA Communications Corp2.1%
Welltower Inc2.09%

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%.

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Risk Analysis

VGTVNQ
Mean Return1.760.89
R-squared74.8444.4
Std. Deviation16.6116.13
Alpha10.412.47
Beta1.020.76
Sharpe Ratio1.230.62
Treynor Ratio20.5511.9

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Beta of 1.02 with a R-squared of 74.84 and a Treynor Ratio of 20.55. Its Alpha is 10.41 while VGT’s Mean Return is 1.76. Furthermore, the fund has a Sharpe Ratio of 1.23 and a Standard Deviation of 16.61.

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

VGT’s Mean Return is 0.87 points higher than that of VNQ and its R-squared is 30.44 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than VNQ. The Alpha and Beta of VGT are 7.94 points higher and 0.26 points higher than VNQ’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. VNQ - Annual Returns

YearVGTVNQ
202045.94%-4.72%
201948.68%28.91%
20182.52%-5.95%
201737.07%4.95%
201613.73%8.53%
20155.02%2.37%
201418.01%30.29%
201330.91%2.42%
201214.05%17.67%
20110.52%8.62%
201012.74%28.44%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% 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

VGT vs. VNQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$72,71820.84%
VNQ$10,000$29,50611.05%

A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

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%.

VGT’s CAGR is 9.79 percentage points higher than that of VNQ and as a result, would have yielded $43,212 more on a $10,000 investment. Thus, VGT outperformed VNQ by 9.79% annually.


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