The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between VNQ and SCHB? And which fund is better?
The expense ratio of VNQ is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than SCHB over the past ten years.
In this article, we’ll compare VNQ vs. SCHB. We’ll look at industry exposure and fund composition, as well as at their performance and holdings. Moreover, I’ll also discuss VNQ’s and SCHB’s risk metrics, annual returns, and portfolio growth and examine how these affect their overall returns.
Summary
| VNQ | SCHB | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Schwab U.S. Broad Market ETF |
| Category | Real Estate | Large Blend |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 77.34B | 21.44B |
| Avg. Return | 11.05% | 14.43% |
| Div. Yield | 2.34% | 1.39% |
| Expense Ratio | 0.12% | 0.03% |
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. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
VNQ’s dividend yield is 0.95% higher than that of SCHB (2.34% vs. 1.39%). Also, VNQ yielded on average 3.38% less per year over the past decade (11.05% vs. 14.43%). The expense ratio of VNQ is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%).
Fund Composition
Industry Exposure
| VNQ | SCHB | |
| Technology | 0.0% | 24.15% |
| Industrials | 0.0% | 9.29% |
| Energy | 0.0% | 2.78% |
| Communication Services | 0.0% | 10.52% |
| Utilities | 0.0% | 2.32% |
| Healthcare | 0.0% | 13.37% |
| Consumer Defensive | 0.0% | 5.76% |
| Real Estate | 100.0% | 3.58% |
| Financial Services | 0.0% | 13.88% |
| Consumer Cyclical | 0.0% | 11.9% |
| Basic Materials | 0.0% | 2.45% |
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. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
VNQ is 96.42% more exposed to the Real Estate sector than SCHB (100.0% vs 3.58%). VNQ’s exposure to Technology and Industrials stocks is 24.15% lower and 9.29% lower respectively (0.0% vs. 24.15% and 0.0% vs. 9.29%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 31.54% less of the fund’s holdings compared to SCHB (0.00% vs. 31.54%).
Holdings
| VNQ Holdings | Weight |
| Vanguard Real Estate II Index | 11.62% |
| American Tower Corp | 7.24% |
| Prologis Inc | 5.33% |
| Crown Castle International Corp | 5.01% |
| Equinix Inc | 4.3% |
| Public Storage | 2.85% |
| Simon Property Group Inc | 2.52% |
| Digital Realty Trust Inc | 2.49% |
| SBA Communications Corp | 2.1% |
| Welltower Inc | 2.09% |
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%.
| SCHB Holdings | Weight |
| Apple Inc | 4.86% |
| Microsoft Corp | 4.61% |
| Amazon.com Inc | 3.33% |
| Facebook Inc A | 1.88% |
| Alphabet Inc A | 1.66% |
| Alphabet Inc Class C | 1.61% |
| Berkshire Hathaway Inc Class B | 1.19% |
| Tesla Inc | 1.18% |
| NVIDIA Corp | 1.13% |
| JPMorgan Chase & Co | 1.06% |
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
Risk Analysis
| VNQ | SCHB | |
| Mean Return | 0.89 | 1.23 |
| R-squared | 44.4 | 99.33 |
| Std. Deviation | 16.13 | 14.12 |
| Alpha | 2.47 | -0.58 |
| Beta | 0.76 | 1.04 |
| Sharpe Ratio | 0.62 | 1 |
| Treynor Ratio | 11.9 | 13.58 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a R-squared of 44.4 with a Alpha of 2.47 and a Standard Deviation of 16.13. Its Mean Return is 0.89 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Beta of 0.76 and a Treynor Ratio of 11.9.
The Schwab U.S. Broad Market ETF (SCHB) has a Treynor Ratio of 13.58 with a Alpha of -0.58 and a Sharpe Ratio of 1. Its Mean Return is 1.23 while SCHB’s Standard Deviation is 14.12. Furthermore, the fund has a R-squared of 99.33 and a Beta of 1.04.
VNQ’s Mean Return is 0.34 points lower than that of SCHB and its R-squared is 54.93 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than SCHB. The Alpha and Beta of VNQ are 3.05 points higher and 0.28 points lower than SCHB’s Alpha and Beta.
Performance
Annual Returns
| Year | VNQ | SCHB |
| 2020 | -4.72% | 20.77% |
| 2019 | 28.91% | 30.94% |
| 2018 | -5.95% | -5.25% |
| 2017 | 4.95% | 21.18% |
| 2016 | 8.53% | 12.56% |
| 2015 | 2.37% | 0.45% |
| 2014 | 30.29% | 12.67% |
| 2013 | 2.42% | 33.37% |
| 2012 | 17.67% | 16.22% |
| 2011 | 8.62% | 1.4% |
| 2010 | 28.44% | 17.1% |
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 SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $22,973 | 11.05% |
| SCHB | $10,000 | $36,354 | 14.43% |
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 SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
VNQ’s CAGR is 3.38 percentage points lower than that of SCHB and as a result, would have yielded $13,381 less on a $10,000 investment. Thus, VNQ performed worse than SCHB by 3.38% annually.
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