The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and RSP is a Invesco Large Blend fund. So, what’s the difference between VNQ and RSP? And which fund is better?
The expense ratio of VNQ is 0.08 percentage points lower than RSP’s (0.12% vs. 0.2%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than RSP over the past ten years.
In this article, we’ll compare VNQ vs. RSP. We’ll look at fund composition and industry exposure, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss VNQ’s and RSP’s annual returns, performance, and risk metrics and examine how these affect their overall returns.
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!
|Name||Vanguard Real Estate Index Fund ETF Shares||Invesco S&P 500 Equal Weight ETF|
|Category||Real Estate||Large Blend|
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 Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
VNQ’s dividend yield is 1.03% higher than that of RSP (2.34% vs. 1.31%). Also, VNQ yielded on average 2.74% less per year over the past decade (11.05% vs. 13.79%). The expense ratio of VNQ is 0.08 percentage points lower than RSP’s (0.12% vs. 0.2%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! 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 Invesco S&P 500 Equal Weight ETF (RSP) has the most exposure to the Technology sector at 14.73%. This is followed by Industrials and Healthcare at 14.62% and 13.69% respectively. Basic Materials (4.04%), Communication Services (4.31%), and Utilities (5.58%) only make up 13.93% of the fund’s total assets.
RSP’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Consumer Cyclical, Financial Services, and Healthcare stocks at 5.84%, 6.86%, 13.01%, 13.43%, and 13.69%.
VNQ is 94.16% more exposed to the Real Estate sector than RSP (100.0% vs 5.84%). VNQ’s exposure to Technology and Industrials stocks is 14.73% lower and 14.62% lower respectively (0.0% vs. 14.73% and 0.0% vs. 14.62%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 33.30% less of the fund’s holdings compared to RSP (0.00% vs. 33.30%).
|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%.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a R-squared of 44.4 with a Mean Return of 0.89 and a Treynor Ratio of 11.9. Its Standard Deviation is 16.13 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Beta of 0.76 and a Alpha of 2.47.
The Invesco S&P 500 Equal Weight ETF (RSP) has a Alpha of -2.45 with a Mean Return of 1.19 and a Sharpe Ratio of 0.89. Its R-squared is 94.47 while RSP’s Standard Deviation is 15.36. Furthermore, the fund has a Beta of 1.1 and a Treynor Ratio of 12.12.
VNQ’s Mean Return is 0.30 points lower than that of RSP and its R-squared is 50.07 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than RSP. The Alpha and Beta of VNQ are 4.92 points higher and 0.34 points lower than RSP’s Alpha and Beta.
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).
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 RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% 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 RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
VNQ’s CAGR is 2.74 percentage points lower than that of RSP and as a result, would have yielded $9,158 less on a $10,000 investment. Thus, VNQ performed worse than RSP by 2.74% 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.