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VNQ vs. MTUM: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and MTUM is a iShares Large Growth fund. So, what’s the difference between VNQ and MTUM? And which fund is better?

The expense ratio of VNQ is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than MTUM over the past ten years.

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

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Summary

VNQMTUM
NameVanguard Real Estate Index Fund ETF SharesiShares MSCI USA Momentum Factor ETF
CategoryReal EstateLarge Growth
IssuerVanguardiShares
AUM77.34B14.53B
Avg. Return11.05%17.37%
Div. Yield2.34%0.44%
Expense Ratio0.12%0.15%

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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

VNQ’s dividend yield is 1.90% higher than that of MTUM (2.34% vs. 0.44%). Also, VNQ yielded on average 6.32% less per year over the past decade (11.05% vs. 17.37%). The expense ratio of VNQ is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%).

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Fund Composition

Industry Exposure

VNQ vs. MTUM - Industry Exposure

VNQMTUM
Technology0.0%15.24%
Industrials0.0%12.47%
Energy0.0%1.77%
Communication Services0.0%13.18%
Utilities0.0%0.19%
Healthcare0.0%6.41%
Consumer Defensive0.0%2.88%
Real Estate100.0%0.43%
Financial Services0.0%34.32%
Consumer Cyclical0.0%9.96%
Basic Materials0.0%3.15%

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 MSCI USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.

MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.

VNQ is 99.57% more exposed to the Real Estate sector than MTUM (100.0% vs 0.43%). VNQ’s exposure to Technology and Industrials stocks is 15.24% lower and 12.47% lower respectively (0.0% vs. 15.24% and 0.0% vs. 12.47%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 47.16% less of the fund’s holdings compared to MTUM (0.00% vs. 47.16%).

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%.

MTUM - Holdings

MTUM HoldingsWeight
Tesla Inc5.63%
The Walt Disney Co4.39%
JPMorgan Chase & Co4.35%
Berkshire Hathaway Inc Class B4.34%
Bank of America Corp3.81%
PayPal Holdings Inc3.76%
Wells Fargo & Co3.05%
Applied Materials Inc3.05%
Moderna Inc2.89%
Alphabet Inc Class C2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

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Risk Analysis

VNQMTUM
Mean Return0.890
R-squared44.40
Std. Deviation16.130
Alpha2.470
Beta0.760
Sharpe Ratio0.620
Treynor Ratio11.90

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a Standard Deviation of 16.13 and a Beta of 0.76. Its Treynor Ratio is 11.9 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 MSCI USA Momentum Factor ETF (MTUM) has a R-squared of 0 with a Beta of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while MTUM’s Standard Deviation is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Mean Return of 0.

VNQ’s Mean Return is 0.89 points higher than that of MTUM and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than MTUM. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than MTUM’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. MTUM - Annual Returns

YearVNQMTUM
2020-4.72%29.69%
201928.91%27.57%
2018-5.95%-1.77%
20174.95%37.6%
20168.53%4.89%
20152.37%9.12%
201430.29%14.48%
20132.42%0.0%
201217.67%0.0%
20118.62%0.0%
201028.44%0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

VNQ vs. MTUM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$17,54911.05%
MTUM$10,000$29,30117.37%

A $10,000 investment in VNQ would have resulted in a final balance of $17,549. This is a profit of $7,549 over 7 years and amounts to a compound annual growth rate (CAGR) of 11.05%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

VNQ’s CAGR is 6.32 percentage points lower than that of MTUM and as a result, would have yielded $11,752 less on a $10,000 investment. Thus, VNQ performed worse than MTUM by 6.32% annually.


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