The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IEF is a iShares Long Government fund. So, what’s the difference between VNQ and IEF? And which fund is better?
The expense ratio of VNQ is 0.03 percentage points lower than IEF’s (0.12% vs. 0.15%). VNQ also has a high exposure to the real estate sector while IEF is mostly comprised of AAA bonds. Overall, VNQ has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VNQ vs. IEF. We’ll look at portfolio growth and annual returns, as well as at their holdings and performance. Moreover, I’ll also discuss VNQ’s and IEF’s risk metrics, fund composition, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard Real Estate Index Fund ETF Shares||iShares 7-10 Year Treasury Bond ETF|
|Category||Real Estate||Long 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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VNQ’s dividend yield is 1.50% higher than that of IEF (2.34% vs. 0.84%). Also, VNQ yielded on average 5.99% more per year over the past decade (11.05% vs. 5.06%). The expense ratio of VNQ is 0.03 percentage points lower than IEF’s (0.12% vs. 0.15%).
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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%.
|IEF Bond Sectors||Weight|
IEF’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.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a Mean Return of 0.89 and a Standard Deviation of 16.13. Its Beta is 0.76 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a R-squared of 44.4 and a Treynor Ratio of 11.9.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a Treynor Ratio of 1.97 and a Mean Return of 0.32. Its Sharpe Ratio is 0.6 while IEF’s R-squared is 77.56. Furthermore, the fund has a Standard Deviation of 5.42 and a Alpha of -1.2.
VNQ’s Mean Return is 0.57 points higher than that of IEF and its R-squared is 33.16 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than IEF. The Alpha and Beta of VNQ are 3.67 points higher and 0.83 points lower than IEF’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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% 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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
VNQ’s CAGR is 5.99 percentage points higher than that of IEF and as a result, would have yielded $12,570 more on a $10,000 investment. Thus, VNQ outperformed IEF by 5.99% annually.
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