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VNQ vs. IAU: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IAU is a iShares N/A fund. So, what’s the difference between VNQ and IAU? And which fund is better?

The expense ratio of VNQ is 0.13 percentage points lower than IAU’s (0.12% vs. 0.25%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided higher returns than IAU over the past ten years.

In this article, we’ll compare VNQ vs. IAU. We’ll look at fund composition and annual returns, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss VNQ’s and IAU’s performance, risk metrics, and holdings and examine how these affect their overall returns.

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Summary

VNQIAU
NameVanguard Real Estate Index Fund ETF SharesiShares Gold Trust
CategoryReal EstateN/A
IssuerVanguardiShares
AUM77.34B28.61B
Avg. Return11.05%6.03%
Div. Yield2.34%0.0%
Expense Ratio0.12%0.25%

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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

VNQ’s dividend yield is 2.34% higher than that of IAU (2.34% vs. 0.0%). Also, VNQ yielded on average 5.02% more per year over the past decade (11.05% vs. 6.03%). The expense ratio of VNQ is 0.13 percentage points lower than IAU’s (0.12% vs. 0.25%).

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Fund Composition

Industry Exposure

VNQ vs. IAU - Industry Exposure

VNQIAU
Technology0.0%0.0%
Industrials0.0%0.0%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%0.0%
Real Estate100.0%0.0%
Financial Services0.0%0.0%
Consumer Cyclical0.0%0.0%
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 iShares Gold Trust (IAU) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

IAU’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VNQ is 100.00% more exposed to the Real Estate sector than IAU (100.0% vs 0.0%). VNQ’s exposure to Technology and Industrials stocks is 0.00% lower and 0.00% lower respectively (0.0% vs. 0.0% and 0.0% vs. 0.0%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to IAU (0.00% vs. 0.00%).

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%.

IAU - Holdings

IAU HoldingsWeight
Gold100.0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

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Risk Analysis

VNQIAU
Mean Return0.890.23
R-squared44.416.03
Std. Deviation16.1316.97
Alpha2.474.16
Beta0.760.48
Sharpe Ratio0.620.13
Treynor Ratio11.91.5

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Standard Deviation of 16.13 with a R-squared of 44.4 and a Beta of 0.76. Its Treynor Ratio is 11.9 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Sharpe Ratio of 0.62 and a Mean Return of 0.89.

The iShares Gold Trust (IAU) has a R-squared of 16.03 with a Beta of 0.48 and a Sharpe Ratio of 0.13. Its Treynor Ratio is 1.5 while IAU’s Alpha is 4.16. Furthermore, the fund has a Standard Deviation of 16.97 and a Mean Return of 0.23.

VNQ’s Mean Return is 0.66 points higher than that of IAU and its R-squared is 28.37 points higher. With a Standard Deviation of 16.13, VNQ is slightly less volatile than IAU. The Alpha and Beta of VNQ are 1.69 points lower and 0.28 points higher than IAU’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. IAU - Annual Returns

YearVNQIAU
2020-4.72%23.86%
201928.91%18.54%
2018-5.95%-1.39%
20174.95%11.58%
20168.53%8.85%
20152.37%-11.65%
201430.29%-0.44%
20132.42%-27.96%
201217.67%8.37%
20118.62%8.66%
201028.44%27.93%

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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.

Portfolio Growth

VNQ vs. IAU - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
IAU$10,000$16,7866.03%

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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.

VNQ’s CAGR is 5.02 percentage points higher than that of IAU and as a result, would have yielded $12,720 more on a $10,000 investment. Thus, VNQ outperformed IAU by 5.02% annually.


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