The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and ITOT is a iShares Large Blend fund. So, what’s the difference between VNQ and ITOT? And which fund is better?
The expense ratio of VNQ is 0.09 percentage points higher than ITOT’s (0.12% vs. 0.03%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than ITOT over the past ten years.
In this article, we’ll compare VNQ vs. ITOT. We’ll look at portfolio growth and fund composition, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss VNQ’s and ITOT’s performance, industry exposure, and holdings and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||iShares Core S&P Total U.S. Stock Market ETF|
|Category||Real Estate||Large Blend|
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 Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
VNQ’s dividend yield is 1.14% higher than that of ITOT (2.34% vs. 1.2%). Also, VNQ yielded on average 3.54% less per year over the past decade (11.05% vs. 14.59%). The expense ratio of VNQ is 0.09 percentage points higher than ITOT’s (0.12% vs. 0.03%).
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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 Core S&P Total U.S. Stock Market ETF (ITOT) has the most exposure to the Technology sector at 24.49%. This is followed by Financial Services and Healthcare at 13.69% and 13.59% respectively. Basic Materials (2.47%), Energy (2.51%), and Real Estate (3.67%) only make up 8.65% of the fund’s total assets.
ITOT’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.79%, 9.21%, 10.54%, 11.69%, and 13.59%.
VNQ is 96.33% more exposed to the Real Estate sector than ITOT (100.0% vs 3.67%). VNQ’s exposure to Technology and Industrials stocks is 24.49% lower and 9.21% lower respectively (0.0% vs. 24.49% and 0.0% vs. 9.21%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 31.17% less of the fund’s holdings compared to ITOT (0.00% vs. 31.17%).
|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%.
|Facebook Inc Class A||1.89%|
|Alphabet Inc Class A||1.79%|
|Alphabet Inc Class C||1.71%|
|Berkshire Hathaway Inc Class B||1.17%|
|JPMorgan Chase & Co||1.02%|
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
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The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Treynor Ratio of 11.9 and a Alpha of 2.47. Its Standard Deviation is 16.13 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Mean Return of 0.89 and a Sharpe Ratio of 0.62.
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Beta of 1.03 with a Sharpe Ratio of 1.04 and a Mean Return of 1.27. Its Treynor Ratio is 14.13 while ITOT’s Standard Deviation is 14.02. Furthermore, the fund has a Alpha of -0.54 and a R-squared of 99.4.
VNQ’s Mean Return is 0.38 points lower than that of ITOT and its R-squared is 55.00 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than ITOT. The Alpha and Beta of VNQ are 3.01 points higher and 0.27 points lower than ITOT’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 2013 was the strongest year for ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% 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 ITOT, the end total would have been $42,310. This equates to a $32,310 profit over 11 years and a compound annual growth rate (CAGR) of 14.59%.
VNQ’s CAGR is 3.54 percentage points lower than that of ITOT and as a result, would have yielded $12,804 less on a $10,000 investment. Thus, VNQ performed worse than ITOT by 3.54% annually.
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