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VNQ vs. MDY: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between VNQ and MDY? And which fund is better?

The expense ratio of VNQ is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided lower returns than MDY over the past ten years.

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

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Summary

VNQMDY
NameVanguard Real Estate Index Fund ETF SharesSPDR S&P MIDCAP 400 ETF Trust
CategoryReal EstateMid-Cap Blend
IssuerVanguardSPDR State Street Global Advisors
AUM77.34B21.31B
Avg. Return11.05%13.29%
Div. Yield2.34%0.94%
Expense Ratio0.12%0.23%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

VNQ’s dividend yield is 1.40% higher than that of MDY (2.34% vs. 0.94%). Also, VNQ yielded on average 2.24% less per year over the past decade (11.05% vs. 13.29%). The expense ratio of VNQ is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%).

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Fund Composition

Industry Exposure

VNQ vs. MDY - Industry Exposure

VNQMDY
Technology0.0%14.74%
Industrials0.0%17.88%
Energy0.0%2.52%
Communication Services0.0%1.63%
Utilities0.0%2.84%
Healthcare0.0%11.17%
Consumer Defensive0.0%4.2%
Real Estate100.0%9.66%
Financial Services0.0%15.2%
Consumer Cyclical0.0%14.89%
Basic Materials0.0%5.27%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

VNQ is 90.34% more exposed to the Real Estate sector than MDY (100.0% vs 9.66%). VNQ’s exposure to Technology and Industrials stocks is 14.74% lower and 17.88% lower respectively (0.0% vs. 14.74% and 0.0% vs. 17.88%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 34.29% less of the fund’s holdings compared to MDY (0.00% vs. 34.29%).

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%.

MDY - Holdings

MDY HoldingsWeight
Bio-Techne Corp0.75%
Molina Healthcare Inc0.63%
Cognex Corp0.63%
Fair Isaac Corp0.62%
XPO Logistics Inc0.61%
SolarEdge Technologies Inc0.61%
Signature Bank0.6%
Graco Inc0.55%
Camden Property Trust0.55%
FactSet Research Systems Inc0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

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Risk Analysis

VNQMDY
Mean Return0.891.08
R-squared44.486.66
Std. Deviation16.1316.83
Alpha2.47-4.1
Beta0.761.15
Sharpe Ratio0.620.73
Treynor Ratio11.99.97

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

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Standard Deviation of 16.83 with a R-squared of 86.66 and a Beta of 1.15. Its Alpha is -4.1 while MDY’s Treynor Ratio is 9.97. Furthermore, the fund has a Sharpe Ratio of 0.73 and a Mean Return of 1.08.

VNQ’s Mean Return is 0.19 points lower than that of MDY and its R-squared is 42.26 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than MDY. The Alpha and Beta of VNQ are 6.57 points higher and 0.39 points lower than MDY’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. MDY - Annual Returns

YearVNQMDY
2020-4.72%13.51%
201928.91%25.86%
2018-5.95%-11.28%
20174.95%15.89%
20168.53%20.33%
20152.37%-2.4%
201430.29%9.42%
20132.42%33.08%
201217.67%17.58%
20118.62%-1.99%
201028.44%26.17%

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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

VNQ vs. MDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
MDY$10,000$36,52413.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

VNQ’s CAGR is 2.24 percentage points lower than that of MDY and as a result, would have yielded $7,018 less on a $10,000 investment. Thus, VNQ performed worse than MDY by 2.24% annually.


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