The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IUSB is a iShares N/A fund. So, what’s the difference between VNQ and IUSB? And which fund is better?
The expense ratio of VNQ is 0.06 percentage points higher than IUSB’s (0.12% vs. 0.06%). VNQ also has a high exposure to the real estate sector while IUSB is mostly comprised of AAA bonds. Overall, VNQ has provided higher returns than IUSB over the past ten years.
In this article, we’ll compare VNQ vs. IUSB. We’ll look at risk metrics and industry exposure, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss VNQ’s and IUSB’s fund composition, performance, and holdings and examine how these affect their overall returns.
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|Name||Vanguard Real Estate Index Fund ETF Shares||iShares Core Total USD Bond Market ETF|
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 Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.
VNQ’s dividend yield is 0.24% higher than that of IUSB (2.34% vs. 2.1%). Also, VNQ yielded on average 6.92% more per year over the past decade (11.05% vs. 4.13%). The expense ratio of VNQ is 0.06 percentage points higher than IUSB’s (0.12% vs. 0.06%).
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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%.
|IUSB Bond Sectors||Weight|
IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Treynor Ratio of 11.9 and a Standard Deviation of 16.13. Its Mean Return is 0.89 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a R-squared of 44.4 and a Alpha of 2.47.
The iShares Core Total USD Bond Market ETF (IUSB) has a Mean Return of 0 with a Beta of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Alpha of 0.
VNQ’s Mean Return is 0.89 points higher than that of IUSB and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than IUSB. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than IUSB’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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VNQ would have resulted in a final balance of $13,469. This is a profit of $3,469 over 6 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.
VNQ’s CAGR is 6.92 percentage points higher than that of IUSB and as a result, would have yielded $765 more on a $10,000 investment. Thus, VNQ outperformed IUSB by 6.92% annually.
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