The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Schwab International Equity ETF (SCHF) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SCHF is a Schwab ETFs Foreign Large Blend fund. So, what’s the difference between VNQ and SCHF? And which fund is better?
The expense ratio of VNQ is 0.06 percentage points higher than SCHF’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 higher returns than SCHF over the past ten years.
In this article, we’ll compare VNQ vs. SCHF. We’ll look at risk metrics and annual returns, as well as at their holdings and performance. Moreover, I’ll also discuss VNQ’s and SCHF’s fund composition, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||Schwab International Equity ETF|
|Category||Real Estate||Foreign 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 Schwab International Equity ETF (SCHF) is a Foreign Large Blend fund that is issued by Schwab ETFs. It currently has 26.99B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 2.16% with an expense ratio of 0.06%.
VNQ’s dividend yield is 0.18% higher than that of SCHF (2.34% vs. 2.16%). Also, VNQ yielded on average 4.62% more per year over the past decade (11.05% vs. 6.43%). The expense ratio of VNQ is 0.06 percentage points higher than SCHF’s (0.12% vs. 0.06%).
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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 International Equity ETF (SCHF) has the most exposure to the Financial Services sector at 17.85%. This is followed by Industrials and Technology at 14.86% and 11.55% respectively. Real Estate (3.17%), Energy (4.23%), and Communication Services (5.65%) only make up 13.05% of the fund’s total assets.
SCHF’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Consumer Cyclical, Healthcare, and Technology stocks at 8.26%, 9.41%, 10.87%, 11.05%, and 11.55%.
VNQ is 96.83% more exposed to the Real Estate sector than SCHF (100.0% vs 3.17%). VNQ’s exposure to Technology and Industrials stocks is 11.55% lower and 14.86% lower respectively (0.0% vs. 11.55% and 0.0% vs. 14.86%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 38.13% less of the fund’s holdings compared to SCHF (0.00% vs. 38.13%).
|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%.
|Samsung Electronics Co Ltd||1.6%|
|ASML Holding NV||1.29%|
|Roche Holding AG||1.24%|
|Toyota Motor Corp||1.02%|
|LVMH Moet Hennessy Louis Vuitton SE||0.93%|
|Shopify Inc A||0.78%|
SCHF’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.66%, 1.6%, 1.29%, 1.24%, and 1.02%.
LVMH Moet Hennessy Louis Vuitton SE (0.93%), Novartis AG (0.92%), and Shopify Inc A (0.78%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the SCHF’s holdings at 0.75% and 0.74%.
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The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Treynor Ratio of 11.9 and a Alpha of 2.47. Its Mean Return is 0.89 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 16.13 and a R-squared of 44.4.
The Schwab International Equity ETF (SCHF) has a Alpha of 0.53 with a R-squared of 98.16 and a Mean Return of 0.58. Its Treynor Ratio is 5.39 while SCHF’s Sharpe Ratio is 0.42. Furthermore, the fund has a Beta of 0.99 and a Standard Deviation of 15.08.
VNQ’s Mean Return is 0.31 points higher than that of SCHF and its R-squared is 53.76 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than SCHF. The Alpha and Beta of VNQ are 1.94 points higher and 0.23 points lower than SCHF’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 2017 was the strongest year for SCHF, returning 25.83% on an annual basis. The poorest year for SCHF in the last ten years was 2018, with a yield of -14.39%. Most years the Schwab International Equity ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 2.88%, 8.6%, and 9.86% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 SCHF, the end total would have been $17,089. This equates to a $7,089 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.
VNQ’s CAGR is 4.62 percentage points higher than that of SCHF and as a result, would have yielded $5,884 more on a $10,000 investment. Thus, VNQ outperformed SCHF by 4.62% annually.
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