The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between VNQ and ARKK? And which fund is better?
The expense ratio of VNQ is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than ARKK over the past ten years.
In this article, we’ll compare VNQ vs. ARKK. We’ll look at fund composition and holdings, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss VNQ’s and ARKK’s performance, industry exposure, and portfolio growth and examine how these affect their overall returns.
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Summary
| VNQ | ARKK | |
| Name | Vanguard Real Estate Index Fund ETF Shares | ARK Innovation ETF |
| Category | Real Estate | Mid-Cap Growth |
| Issuer | Vanguard | ARK ETF Trust |
| AUM | 77.34B | 25.52B |
| Avg. Return | 11.05% | 55.45% |
| Div. Yield | 2.34% | 0.0% |
| Expense Ratio | 0.12% | 0.75% |
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%.
The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.
VNQ’s dividend yield is 2.34% higher than that of ARKK (2.34% vs. 0.0%). Also, VNQ yielded on average 44.40% less per year over the past decade (11.05% vs. 55.45%). The expense ratio of VNQ is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%).
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Fund Composition
Industry Exposure
| VNQ | ARKK | |
| Technology | 0.0% | 30.5% |
| Industrials | 0.0% | 2.11% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 25.01% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 0.0% | 29.47% |
| Consumer Defensive | 0.0% | 0.93% |
| Real Estate | 100.0% | 0.51% |
| Financial Services | 0.0% | 0.04% |
| Consumer Cyclical | 0.0% | 11.42% |
| Basic Materials | 0.0% | 0.0% |
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%.
The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.
ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.
VNQ is 99.49% more exposed to the Real Estate sector than ARKK (100.0% vs 0.51%). VNQ’s exposure to Technology and Industrials stocks is 30.50% lower and 2.11% lower respectively (0.0% vs. 30.5% and 0.0% vs. 2.11%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 12.39% less of the fund’s holdings compared to ARKK (0.00% vs. 12.39%).
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%.
| ARKK Holdings | Weight |
| Tesla Inc | 9.56% |
| Roku Inc Class A | 6.48% |
| Teladoc Health Inc | 5.76% |
| Square Inc A | 4.37% |
| Zoom Video Communications Inc | 4.36% |
| Shopify Inc A | 4.27% |
| Spotify Technology SA | 3.68% |
| Twilio Inc A | 3.66% |
| Coinbase Global Inc Ordinary Shares – Class A | 3.65% |
| Unity Software Inc Ordinary Shares | 3.41% |
ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.
Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.
Risk Analysis
| VNQ | ARKK | |
| Mean Return | 0.89 | 0 |
| R-squared | 44.4 | 0 |
| Std. Deviation | 16.13 | 0 |
| Alpha | 2.47 | 0 |
| Beta | 0.76 | 0 |
| Sharpe Ratio | 0.62 | 0 |
| Treynor Ratio | 11.9 | 0 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Standard Deviation of 16.13 with a Beta of 0.76 and a Mean Return of 0.89. Its Sharpe Ratio is 0.62 while VNQ’s Treynor Ratio is 11.9. Furthermore, the fund has a R-squared of 44.4 and a Alpha of 2.47.
The ARK Innovation ETF (ARKK) has a Beta of 0 with a Treynor Ratio of 0 and a Standard Deviation of 0. Its Sharpe Ratio is 0 while ARKK’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.
VNQ’s Mean Return is 0.89 points higher than that of ARKK and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than ARKK. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than ARKK’s Alpha and Beta.
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Performance
Annual Returns
| Year | VNQ | ARKK |
| 2020 | -4.72% | 152.52% |
| 2019 | 28.91% | 35.73% |
| 2018 | -5.95% | 3.58% |
| 2017 | 4.95% | 87.38% |
| 2016 | 8.53% | -1.96% |
| 2015 | 2.37% | 3.76% |
| 2014 | 30.29% | 0.0% |
| 2013 | 2.42% | 0.0% |
| 2012 | 17.67% | 0.0% |
| 2011 | 8.62% | 0.0% |
| 2010 | 28.44% | 0.0% |
VNQ had its best year in 2014 with an annual return of 30.29%. VNQ’s worst year over the past decade yielded -5.95% and occurred in 2018. In most years the Vanguard Real Estate Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 4.95%, 8.53%, and 8.62% respectively.
The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $13,157 | 11.05% |
| ARKK | $10,000 | $65,218 | 55.45% |
A $10,000 investment in VNQ would have resulted in a final balance of $13,157. This is a profit of $3,157 over 5 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.
VNQ’s CAGR is 44.40 percentage points lower than that of ARKK and as a result, would have yielded $52,061 less on a $10,000 investment. Thus, VNQ performed worse than ARKK by 44.40% annually.
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