Skip to content

VNQ vs. IWN: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IWN is a iShares Small Value fund. So, what’s the difference between VNQ and IWN? And which fund is better?

The expense ratio of VNQ is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided higher returns than IWN over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

VNQIWN
NameVanguard Real Estate Index Fund ETF SharesiShares Russell 2000 Value ETF
CategoryReal EstateSmall Value
IssuerVanguardiShares
AUM77.34B15.48B
Avg. Return11.05%10.96%
Div. Yield2.34%1.26%
Expense Ratio0.12%0.24%

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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

VNQ’s dividend yield is 1.08% higher than that of IWN (2.34% vs. 1.26%). Also, VNQ yielded on average 0.09% more per year over the past decade (11.05% vs. 10.96%). The expense ratio of VNQ is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).

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).

Fund Composition

Industry Exposure

VNQ vs. IWN - Industry Exposure

VNQIWN
Technology0.0%6.02%
Industrials0.0%14.58%
Energy0.0%5.84%
Communication Services0.0%4.17%
Utilities0.0%4.69%
Healthcare0.0%10.94%
Consumer Defensive0.0%3.77%
Real Estate100.0%14.36%
Financial Services0.0%22.97%
Consumer Cyclical0.0%8.39%
Basic Materials0.0%4.29%

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 Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

VNQ is 85.64% more exposed to the Real Estate sector than IWN (100.0% vs 14.36%). VNQ’s exposure to Technology and Industrials stocks is 6.02% lower and 14.58% lower respectively (0.0% vs. 6.02% and 0.0% vs. 14.58%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 35.13% less of the fund’s holdings compared to IWN (0.00% vs. 35.13%).

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%.

IWN - Holdings

IWN HoldingsWeight
AMC Entertainment Holdings Inc Class A1.06%
Tenet Healthcare Corp0.47%
Stag Industrial Inc0.47%
Ovintiv Inc0.45%
EMCOR Group Inc0.42%
Valley National Bancorp0.37%
Chesapeake Energy Corp Ordinary Shares – New0.37%
Agree Realty Corp0.36%
Macy’s Inc0.35%
Essent Group Ltd0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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).

Risk Analysis

VNQIWN
Mean Return0.891.01
R-squared44.472.64
Std. Deviation16.1319.28
Alpha2.47-6.32
Beta0.761.21
Sharpe Ratio0.620.59
Treynor Ratio11.98.3

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

The iShares Russell 2000 Value ETF (IWN) has a Sharpe Ratio of 0.59 with a R-squared of 72.64 and a Standard Deviation of 19.28. Its Mean Return is 1.01 while IWN’s Beta is 1.21. Furthermore, the fund has a Alpha of -6.32 and a Treynor Ratio of 8.3.

VNQ’s Mean Return is 0.12 points lower than that of IWN and its R-squared is 28.24 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than IWN. The Alpha and Beta of VNQ are 8.79 points higher and 0.45 points lower than IWN’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!

Performance

Annual Returns

VNQ vs. IWN - Annual Returns

YearVNQIWN
2020-4.72%4.5%
201928.91%22.17%
2018-5.95%-12.94%
20174.95%7.73%
20168.53%31.64%
20152.37%-7.53%
201430.29%4.13%
20132.42%34.3%
201217.67%17.92%
20118.62%-5.64%
201028.44%24.29%

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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

VNQ vs. IWN - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
IWN$10,000$28,18910.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

VNQ’s CAGR is 0.09 percentage points higher than that of IWN and as a result, would have yielded $1,317 more on a $10,000 investment. Thus, VNQ outperformed IWN by 0.09% annually.


Current recommendations:

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.

Leave a Reply

Your email address will not be published.