The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares S&P 500 Growth ETF (IVW) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IVW is a iShares Large Growth fund. So, what’s the difference between VNQ and IVW? And which fund is better?
The expense ratio of VNQ is 0.06 percentage points lower than IVW’s (0.12% vs. 0.18%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than IVW over the past ten years.
In this article, we’ll compare VNQ vs. IVW. We’ll look at performance and industry exposure, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VNQ’s and IVW’s holdings, portfolio growth, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||iShares S&P 500 Growth ETF|
|Category||Real Estate||Large Growth|
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 S&P 500 Growth ETF (IVW) is a Large Growth fund that is issued by iShares. It currently has 35.72B total assets under management and has yielded an average annual return of 16.74% over the past 10 years. The fund has a dividend yield of 0.61% with an expense ratio of 0.18%.
VNQ’s dividend yield is 1.73% higher than that of IVW (2.34% vs. 0.61%). Also, VNQ yielded on average 5.69% less per year over the past decade (11.05% vs. 16.74%). The expense ratio of VNQ is 0.06 percentage points lower than IVW’s (0.12% vs. 0.18%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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 S&P 500 Growth ETF (IVW) has the most exposure to the Technology sector at 37.8%. This is followed by Communication Services and Consumer Cyclical at 15.44% and 15.25% respectively. Utilities (0.47%), Real Estate (1.11%), and Basic Materials (1.65%) only make up 3.23% of the fund’s total assets.
IVW’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 3.84%, 5.72%, 6.78%, 11.88%, and 15.25%.
VNQ is 98.89% more exposed to the Real Estate sector than IVW (100.0% vs 1.11%). VNQ’s exposure to Technology and Industrials stocks is 37.80% lower and 5.72% lower respectively (0.0% vs. 37.8% and 0.0% vs. 5.72%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 25.87% less of the fund’s holdings compared to IVW (0.00% vs. 25.87%).
|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||4.28%|
|Alphabet Inc Class A||4.06%|
|Alphabet Inc Class C||3.86%|
|PayPal Holdings Inc||1.62%|
IVW’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 11.46%, 10.75%, 7.14%, 4.28%, and 4.06%.
Alphabet Inc Class C (3.86%), Tesla Inc (2.65%), and NVIDIA Corp (2.43%) have a slightly smaller but still significant weight. PayPal Holdings Inc and Adobe Inc are also represented in the IVW’s holdings at 1.62% and 1.49%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Standard Deviation of 16.13 and a Sharpe Ratio of 0.62. Its R-squared is 44.4 while VNQ’s Treynor Ratio is 11.9. Furthermore, the fund has a Mean Return of 0.89 and a Alpha of 2.47.
The iShares S&P 500 Growth ETF (IVW) has a Beta of 0.98 with a Mean Return of 1.44 and a Alpha of 2.19. Its Treynor Ratio is 17.24 while IVW’s R-squared is 93.82. Furthermore, the fund has a Standard Deviation of 13.77 and a Sharpe Ratio of 1.21.
VNQ’s Mean Return is 0.55 points lower than that of IVW and its R-squared is 49.42 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than IVW. The Alpha and Beta of VNQ are 0.28 points higher and 0.22 points lower than IVW’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 IVW, returning 33.21% on an annual basis. The poorest year for IVW in the last ten years was 2018, with a yield of -0.17%. Most years the iShares S&P 500 Growth ETF has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 14.39%, 14.67%, and 14.84% 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 IVW, the end total would have been $51,915. This equates to a $41,915 profit over 11 years and a compound annual growth rate (CAGR) of 16.74%.
VNQ’s CAGR is 5.69 percentage points lower than that of IVW and as a result, would have yielded $22,409 less on a $10,000 investment. Thus, VNQ performed worse than IVW by 5.69% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.