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VIG vs. VNQ: What’s The Difference?

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

The expense ratio of VIG is 0.06 percentage points lower than VNQ’s (0.06% vs. 0.12%). VIG also has a higher exposure to the industrials sector and a lower standard deviation. Overall, VIG has provided higher returns than VNQ over the past ten years.

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

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Summary

VIGVNQ
NameVanguard Dividend Appreciation Index Fund ETF SharesVanguard Real Estate Index Fund ETF Shares
CategoryLarge BlendReal Estate
IssuerVanguardVanguard
AUM71.92B77.34B
Avg. Return13.35%11.05%
Div. Yield1.56%2.34%
Expense Ratio0.06%0.12%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.

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%.

VIG’s dividend yield is 0.78% lower than that of VNQ (1.56% vs. 2.34%). Also, VIG yielded on average 2.30% more per year over the past decade (13.35% vs. 11.05%). The expense ratio of VIG is 0.06 percentage points lower than VNQ’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

VIG vs. VNQ - Industry Exposure

VIGVNQ
Technology14.93%0.0%
Industrials17.23%0.0%
Energy0.0%0.0%
Communication Services2.86%0.0%
Utilities2.81%0.0%
Healthcare15.52%0.0%
Consumer Defensive15.32%0.0%
Real Estate0.0%100.0%
Financial Services17.18%0.0%
Consumer Cyclical10.47%0.0%
Basic Materials3.67%0.0%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.

VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.

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%.

VIG is 17.23% more exposed to the Industrials sector than VNQ (17.23% vs 0.0%). VIG’s exposure to Financial Services and Healthcare stocks is 17.18% higher and 15.52% higher respectively (17.18% vs. 0.0% and 15.52% vs. 0.0%). In total, Energy, Utilities, and Communication Services also make up 5.67% more of the fund’s holdings compared to VNQ (5.67% vs. 0.00%).

Holdings

VIG - Holdings

VIG HoldingsWeight
Microsoft Corp4.19%
JPMorgan Chase & Co3.8%
Johnson & Johnson3.67%
Walmart Inc3.38%
Visa Inc Class A3.22%
UnitedHealth Group Inc3.22%
The Home Depot Inc2.91%
Procter & Gamble Co2.82%
Comcast Corp Class A2.21%
Coca-Cola Co1.98%

VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.

UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.

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

VIGVNQ
Mean Return1.090.89
R-squared92.244.4
Std. Deviation12.2516.13
Alpha0.122.47
Beta0.860.76
Sharpe Ratio1.010.62
Treynor Ratio14.3311.9

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Alpha of 0.12 with a Mean Return of 1.09 and a Standard Deviation of 12.25. Its Sharpe Ratio is 1.01 while VIG’s R-squared is 92.2. Furthermore, the fund has a Treynor Ratio of 14.33 and a Beta of 0.86.

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

VIG’s Mean Return is 0.20 points higher than that of VNQ and its R-squared is 47.80 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than VNQ. The Alpha and Beta of VIG are 2.35 points lower and 0.10 points higher than VNQ’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. VNQ - Annual Returns

YearVIGVNQ
202015.46%-4.72%
201929.71%28.91%
2018-2.02%-5.95%
201722.22%4.95%
201611.84%8.53%
2015-1.95%2.37%
201410.06%30.29%
201328.99%2.42%
201211.61%17.67%
20116.21%8.62%
201014.67%28.44%

VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% 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

VIG vs. VNQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VIG$10,000$37,95113.35%
VNQ$10,000$29,50611.05%

A $10,000 investment in VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.

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%.

VIG’s CAGR is 2.30 percentage points higher than that of VNQ and as a result, would have yielded $8,445 more on a $10,000 investment. Thus, VIG outperformed VNQ by 2.30% annually.


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