The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VNQ and GOVT? And which fund is better?
The expense ratio of VNQ is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). VNQ also has a high exposure to the real estate sector while GOVT is mostly comprised of AAA bonds. Overall, VNQ has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare VNQ vs. GOVT. We’ll look at annual returns and performance, as well as at their holdings and risk metrics. Moreover, I’ll also discuss VNQ’s and GOVT’s fund composition, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||iShares U.S. Treasury Bond ETF|
|Category||Real Estate||Intermediate Government|
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
VNQ’s dividend yield is 1.34% higher than that of GOVT (2.34% vs. 1.0%). Also, VNQ yielded on average 8.37% more per year over the past decade (11.05% vs. 2.67%). The expense ratio of VNQ is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%).
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|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%.
|GOVT Bond Sectors||Weight|
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Mean Return of 0.89 with a R-squared of 44.4 and a Beta of 0.76. Its Standard Deviation is 16.13 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Treynor Ratio of 11.9 and a Alpha of 2.47.
The iShares U.S. Treasury Bond ETF (GOVT) has a Mean Return of 0 with a Standard Deviation of 0 and a R-squared of 0. Its Treynor Ratio is 0 while GOVT’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.
VNQ’s Mean Return is 0.89 points higher than that of GOVT and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than GOVT. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than GOVT’s Alpha and Beta.
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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 GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VNQ would have resulted in a final balance of $17,974. This is a profit of $7,974 over 8 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
VNQ’s CAGR is 8.37 percentage points higher than that of GOVT and as a result, would have yielded $5,677 more on a $10,000 investment. Thus, VNQ outperformed GOVT by 8.37% annually.
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