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VNQ vs. ARKK: What’s The Difference?

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

VNQARKK
NameVanguard Real Estate Index Fund ETF SharesARK Innovation ETF
CategoryReal EstateMid-Cap Growth
IssuerVanguardARK ETF Trust
AUM77.34B25.52B
Avg. Return11.05%55.45%
Div. Yield2.34%0.0%
Expense Ratio0.12%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 vs. ARKK - Industry Exposure

VNQARKK
Technology0.0%30.5%
Industrials0.0%2.11%
Energy0.0%0.0%
Communication Services0.0%25.01%
Utilities0.0%0.0%
Healthcare0.0%29.47%
Consumer Defensive0.0%0.93%
Real Estate100.0%0.51%
Financial Services0.0%0.04%
Consumer Cyclical0.0%11.42%
Basic Materials0.0%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

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%.

ARKK - Holdings

ARKK HoldingsWeight
Tesla Inc9.56%
Roku Inc Class A6.48%
Teladoc Health Inc5.76%
Square Inc A4.37%
Zoom Video Communications Inc4.36%
Shopify Inc A4.27%
Spotify Technology SA3.68%
Twilio Inc A3.66%
Coinbase Global Inc Ordinary Shares – Class A3.65%
Unity Software Inc Ordinary Shares3.41%

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%.

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Risk Analysis

VNQARKK
Mean Return0.890
R-squared44.40
Std. Deviation16.130
Alpha2.470
Beta0.760
Sharpe Ratio0.620
Treynor Ratio11.90

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

VNQ vs. ARKK - Annual Returns

YearVNQARKK
2020-4.72%152.52%
201928.91%35.73%
2018-5.95%3.58%
20174.95%87.38%
20168.53%-1.96%
20152.37%3.76%
201430.29%0.0%
20132.42%0.0%
201217.67%0.0%
20118.62%0.0%
201028.44%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

VNQ vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$13,15711.05%
ARKK$10,000$65,21855.45%

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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