The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between VNQ and BIV? And which fund is better?
The expense ratio of VNQ is 0.07 percentage points higher than BIV’s (0.12% vs. 0.05%). VNQ also has a high exposure to the real estate sector while BIV is mostly comprised of AAA bonds. Overall, VNQ has provided higher returns than BIV over the past ten years.
In this article, we’ll compare VNQ vs. BIV. We’ll look at fund composition and performance, as well as at their holdings and risk metrics. Moreover, I’ll also discuss VNQ’s and BIV’s industry exposure, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||Vanguard Intermediate-Term Bond Index Fund ETF Shares|
|Category||Real Estate||Intermediate-Term Bond|
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 Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.
VNQ’s dividend yield is 0.28% higher than that of BIV (2.34% vs. 2.06%). Also, VNQ yielded on average 5.73% more per year over the past decade (11.05% vs. 5.31%). The expense ratio of VNQ is 0.07 percentage points higher than BIV’s (0.12% vs. 0.05%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|Vanguard Real Estate II Index||11.62%|
|American Tower Corp||7.24%|
|Crown Castle International Corp||5.01%|
|Simon Property Group Inc||2.52%|
|Digital Realty Trust Inc||2.49%|
|SBA Communications Corp||2.1%|
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%.
|BIV Bond Sectors||Weight|
BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a Mean Return of 0.89 and a Sharpe Ratio of 0.62. Its Standard Deviation is 16.13 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Treynor Ratio of 11.9 and a Beta of 0.76.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Mean Return of 0.35 with a Treynor Ratio of 2.72 and a Alpha of -0.07. Its Beta is 1.33 while BIV’s R-squared is 95.12. Furthermore, the fund has a Sharpe Ratio of 0.89 and a Standard Deviation of 4.09.
VNQ’s Mean Return is 0.54 points higher than that of BIV and its R-squared is 50.72 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than BIV. The Alpha and Beta of VNQ are 2.54 points higher and 0.57 points lower than BIV’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VNQ would have resulted in a final balance of $29,506. This is a profit of $19,506 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.
VNQ’s CAGR is 5.73 percentage points higher than that of BIV and as a result, would have yielded $12,014 more on a $10,000 investment. Thus, VNQ outperformed BIV by 5.73% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.