The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between VNQ and MUB? And which fund is better?
The expense ratio of VNQ is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%). VNQ also has a high exposure to the real estate sector while MUB is mostly comprised of AA bonds. Overall, VNQ has provided higher returns than MUB over the past ten years.
In this article, we’ll compare VNQ vs. MUB. We’ll look at performance and holdings, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VNQ’s and MUB’s fund composition, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||iShares National Muni Bond ETF|
|Category||Real Estate||Muni National Interm|
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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.
VNQ’s dividend yield is 0.38% higher than that of MUB (2.34% vs. 1.96%). Also, VNQ yielded on average 7.01% more per year over the past decade (11.05% vs. 4.04%). The expense ratio of VNQ is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%).
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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%.
|MUB Bond Sectors||Weight|
MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.
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The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a R-squared of 44.4 with a Sharpe Ratio of 0.62 and a Mean Return of 0.89. Its Standard Deviation is 16.13 while VNQ’s Beta is 0.76. Furthermore, the fund has a Treynor Ratio of 11.9 and a Alpha of 2.47.
The iShares National Muni Bond ETF (MUB) has a Treynor Ratio of 3.2 with a Alpha of -0.46 and a Mean Return of 0.32. Its Standard Deviation is 3.68 while MUB’s R-squared is 99. Furthermore, the fund has a Beta of 1.01 and a Sharpe Ratio of 0.88.
VNQ’s Mean Return is 0.57 points higher than that of MUB and its R-squared is 54.60 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than MUB. The Alpha and Beta of VNQ are 2.93 points higher and 0.25 points lower than MUB’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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% 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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.
VNQ’s CAGR is 7.01 percentage points higher than that of MUB and as a result, would have yielded $14,173 more on a $10,000 investment. Thus, VNQ outperformed MUB by 7.01% annually.
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