The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between VNQ and SCHD? And which fund is better?
The expense ratio of VNQ is 0.06 percentage points higher than SCHD’s (0.12% vs. 0.06%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than SCHD over the past ten years.
In this article, we’ll compare VNQ vs. SCHD. We’ll look at performance and industry exposure, as well as at their fund composition and holdings. Moreover, I’ll also discuss VNQ’s and SCHD’s annual returns, risk metrics, and portfolio growth and examine how these affect their overall returns.
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Summary
| VNQ | SCHD | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Schwab U.S. Dividend Equity ETF |
| Category | Real Estate | Large Value |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 77.34B | 26B |
| Avg. Return | 11.05% | 14.80% |
| Div. Yield | 2.34% | 2.89% |
| Expense Ratio | 0.12% | 0.06% |
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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.
VNQ’s dividend yield is 0.55% lower than that of SCHD (2.34% vs. 2.89%). Also, VNQ yielded on average 3.75% less per year over the past decade (11.05% vs. 14.80%). The expense ratio of VNQ is 0.06 percentage points higher than SCHD’s (0.12% vs. 0.06%).
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Fund Composition
Industry Exposure
| VNQ | SCHD | |
| Technology | 0.0% | 16.26% |
| Industrials | 0.0% | 18.05% |
| Energy | 0.0% | 1.87% |
| Communication Services | 0.0% | 4.96% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 0.0% | 12.64% |
| Consumer Defensive | 0.0% | 14.04% |
| Real Estate | 100.0% | 0.0% |
| Financial Services | 0.0% | 21.69% |
| Consumer Cyclical | 0.0% | 8.36% |
| Basic Materials | 0.0% | 2.13% |
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. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.
SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.
VNQ is 100.00% more exposed to the Real Estate sector than SCHD (100.0% vs 0.0%). VNQ’s exposure to Technology and Industrials stocks is 16.26% lower and 18.05% lower respectively (0.0% vs. 16.26% and 0.0% vs. 18.05%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 44.09% less of the fund’s holdings compared to SCHD (0.00% vs. 44.09%).
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%.
| SCHD Holdings | Weight |
| Merck & Co Inc | 4.24% |
| The Home Depot Inc | 4.19% |
| Texas Instruments Inc | 4.16% |
| Broadcom Inc | 4.15% |
| Amgen Inc | 4.11% |
| PepsiCo Inc | 4.09% |
| BlackRock Inc | 4.05% |
| Pfizer Inc | 3.97% |
| Verizon Communications Inc | 3.96% |
| Cisco Systems Inc | 3.96% |
SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.
PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.
Risk Analysis
| VNQ | SCHD | |
| Mean Return | 0.89 | 0 |
| R-squared | 44.4 | 0 |
| Std. Deviation | 16.13 | 0 |
| Alpha | 2.47 | 0 |
| Beta | 0.76 | 0 |
| Sharpe Ratio | 0.62 | 0 |
| Treynor Ratio | 11.9 | 0 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Standard Deviation of 16.13 with a R-squared of 44.4 and a Sharpe Ratio of 0.62. Its Alpha is 2.47 while VNQ’s Treynor Ratio is 11.9. Furthermore, the fund has a Beta of 0.76 and a Mean Return of 0.89.
The Schwab U.S. Dividend Equity ETF (SCHD) has a Beta of 0 with a Sharpe Ratio of 0 and a Standard Deviation of 0. Its Mean Return is 0 while SCHD’s Treynor Ratio is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.
VNQ’s Mean Return is 0.89 points higher than that of SCHD and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than SCHD. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than SCHD’s Alpha and Beta.
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Performance
Annual Returns
| Year | VNQ | SCHD |
| 2020 | -4.72% | 15.11% |
| 2019 | 28.91% | 27.28% |
| 2018 | -5.95% | -5.46% |
| 2017 | 4.95% | 20.88% |
| 2016 | 8.53% | 16.25% |
| 2015 | 2.37% | -0.21% |
| 2014 | 30.29% | 11.66% |
| 2013 | 2.42% | 32.9% |
| 2012 | 17.67% | 11.4% |
| 2011 | 8.62% | 0.0% |
| 2010 | 28.44% | 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 2013 was the strongest year for SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $17,974 | 11.05% |
| SCHD | $10,000 | $28,823 | 14.80% |
A $10,000 investment in VNQ would have resulted in a final balance of $17,974. This is a profit of $7,974 over 8 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.
VNQ’s CAGR is 3.75 percentage points lower than that of SCHD and as a result, would have yielded $10,849 less on a $10,000 investment. Thus, VNQ performed worse than SCHD by 3.75% annually.
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