The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between VNQ and DFAC? And which fund is better?
The expense ratio of VNQ is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than DFAC over the past ten years.
In this article, we’ll compare VNQ vs. DFAC. We’ll look at industry exposure and annual returns, as well as at their performance and fund composition. Moreover, I’ll also discuss VNQ’s and DFAC’s holdings, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||Dimensional U.S. Core Equity 2 ETF|
|Category||Real Estate||Large Blend|
|Issuer||Vanguard||Dimensional Fund Advisors|
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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
VNQ’s dividend yield is 1.34% higher than that of DFAC (2.34% vs. 1.0%). Also, VNQ yielded on average 2.88% less per year over the past decade (11.05% vs. 13.93%). The expense ratio of VNQ is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).
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 Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.
DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.
VNQ is 99.63% more exposed to the Real Estate sector than DFAC (100.0% vs 0.37%). VNQ’s exposure to Technology and Industrials stocks is 22.81% lower and 14.13% lower respectively (0.0% vs. 22.81% and 0.0% vs. 14.13%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 35.20% less of the fund’s holdings compared to DFAC (0.00% vs. 35.20%).
|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%.
|Johnson & Johnson||1.05%|
|Facebook Inc Class A||1.05%|
|JPMorgan Chase & Co||1.0%|
|Alphabet Inc Class C||0.85%|
|Alphabet Inc Class A||0.84%|
|Berkshire Hathaway Inc Class B||0.75%|
|Visa Inc Class A||0.74%|
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Standard Deviation of 16.13 and a Sharpe Ratio of 0.62. Its Treynor Ratio is 11.9 while VNQ’s Mean Return is 0.89. Furthermore, the fund has a Alpha of 2.47 and a R-squared of 44.4.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a R-squared of 95.1 with a Mean Return of 1.19 and a Treynor Ratio of 11.85. Its Sharpe Ratio is 0.88 while DFAC’s Beta is 1.12. Furthermore, the fund has a Standard Deviation of 15.55 and a Alpha of -2.75.
VNQ’s Mean Return is 0.30 points lower than that of DFAC and its R-squared is 50.70 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than DFAC. The Alpha and Beta of VNQ are 5.22 points higher and 0.36 points lower than DFAC’s Alpha and Beta.
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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% 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 DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
VNQ’s CAGR is 2.88 percentage points lower than that of DFAC and as a result, would have yielded $9,290 less on a $10,000 investment. Thus, VNQ performed worse than DFAC by 2.88% annually.
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