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VNQ vs. SCHA: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between VNQ and SCHA? And which fund is better?

The expense ratio of VNQ is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided lower returns than SCHA over the past ten years.

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

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Summary

VNQSCHA
NameVanguard Real Estate Index Fund ETF SharesSchwab U.S. Small-Cap ETF
CategoryReal EstateSmall Blend
IssuerVanguardSchwab ETFs
AUM77.34B16.51B
Avg. Return11.05%12.62%
Div. Yield2.34%0.98%
Expense Ratio0.12%0.04%

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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

VNQ’s dividend yield is 1.36% higher than that of SCHA (2.34% vs. 0.98%). Also, VNQ yielded on average 1.57% less per year over the past decade (11.05% vs. 12.62%). The expense ratio of VNQ is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%).

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Fund Composition

Industry Exposure

VNQ vs. SCHA - Industry Exposure

VNQSCHA
Technology0.0%14.91%
Industrials0.0%15.37%
Energy0.0%3.35%
Communication Services0.0%3.5%
Utilities0.0%1.83%
Healthcare0.0%16.5%
Consumer Defensive0.0%3.75%
Real Estate100.0%7.83%
Financial Services0.0%14.49%
Consumer Cyclical0.0%14.48%
Basic Materials0.0%3.98%

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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.

SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.

VNQ is 92.17% more exposed to the Real Estate sector than SCHA (100.0% vs 7.83%). VNQ’s exposure to Technology and Industrials stocks is 14.91% lower and 15.37% lower respectively (0.0% vs. 14.91% and 0.0% vs. 15.37%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 32.72% less of the fund’s holdings compared to SCHA (0.00% vs. 32.72%).

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%.

SCHA - Holdings

SCHA HoldingsWeight
AMC Entertainment Holdings Inc Class A0.67%
Caesars Entertainment Inc0.51%
Cloudflare Inc0.48%
NovoCure Ltd0.45%
Plug Power Inc0.41%
10x Genomics Inc Ordinary Shares – Class A0.34%
GameStop Corp Class A0.28%
RH0.27%
Penn National Gaming Inc0.27%
Axon Enterprise Inc0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

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Risk Analysis

VNQSCHA
Mean Return0.891.14
R-squared44.482.26
Std. Deviation16.1318.68
Alpha2.47-4.65
Beta0.761.25
Sharpe Ratio0.620.7
Treynor Ratio11.99.62

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

The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Standard Deviation of 18.68 and a Sharpe Ratio of 0.7. Its R-squared is 82.26 while SCHA’s Alpha is -4.65. Furthermore, the fund has a Treynor Ratio of 9.62 and a Mean Return of 1.14.

VNQ’s Mean Return is 0.25 points lower than that of SCHA and its R-squared is 37.86 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than SCHA. The Alpha and Beta of VNQ are 7.12 points higher and 0.49 points lower than SCHA’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. SCHA - Annual Returns

YearVNQSCHA
2020-4.72%19.35%
201928.91%26.54%
2018-5.95%-11.75%
20174.95%15.04%
20168.53%19.88%
20152.37%-4.24%
201430.29%6.53%
20132.42%39.59%
201217.67%18.24%
20118.62%-2.95%
201028.44%28.31%

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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

VNQ vs. SCHA - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$22,97311.05%
SCHA$10,000$30,03512.62%

A $10,000 investment in VNQ would have resulted in a final balance of $22,973. This is a profit of $12,973 over 10 years and amounts to a compound annual growth rate (CAGR) of 11.05%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

VNQ’s CAGR is 1.57 percentage points lower than that of SCHA and as a result, would have yielded $7,062 less on a $10,000 investment. Thus, VNQ performed worse than SCHA by 1.57% annually.


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