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.
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!
Summary
| VNQ | SCHF | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Schwab International Equity ETF |
| Category | Real Estate | Foreign Large Blend |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 77.34B | 26.99B |
| Avg. Return | 11.05% | 6.43% |
| Div. Yield | 2.34% | 2.16% |
| 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 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%).
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).
Fund Composition
Industry Exposure
| VNQ | SCHF | |
| Technology | 0.0% | 11.55% |
| Industrials | 0.0% | 14.86% |
| Energy | 0.0% | 4.23% |
| Communication Services | 0.0% | 5.65% |
| Utilities | 0.0% | 3.09% |
| Healthcare | 0.0% | 11.05% |
| Consumer Defensive | 0.0% | 9.41% |
| Real Estate | 100.0% | 3.17% |
| Financial Services | 0.0% | 17.85% |
| Consumer Cyclical | 0.0% | 10.87% |
| Basic Materials | 0.0% | 8.26% |
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%).
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%.
| SCHF Holdings | Weight |
| Nestle SA | 1.66% |
| 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% |
| Novartis AG | 0.92% |
| Shopify Inc A | 0.78% |
| AstraZeneca PLC | 0.75% |
| SAP SE | 0.74% |
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%.
Risk Analysis
| VNQ | SCHF | |
| Mean Return | 0.89 | 0.58 |
| R-squared | 44.4 | 98.16 |
| Std. Deviation | 16.13 | 15.08 |
| Alpha | 2.47 | 0.53 |
| Beta | 0.76 | 0.99 |
| Sharpe Ratio | 0.62 | 0.42 |
| Treynor Ratio | 11.9 | 5.39 |
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.
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).
Performance
Annual Returns
| Year | VNQ | SCHF |
| 2020 | -4.72% | 9.86% |
| 2019 | 28.91% | 22.15% |
| 2018 | -5.95% | -14.39% |
| 2017 | 4.95% | 25.83% |
| 2016 | 8.53% | 2.88% |
| 2015 | 2.37% | -2.44% |
| 2014 | 30.29% | -4.44% |
| 2013 | 2.42% | 20.03% |
| 2012 | 17.67% | 17.12% |
| 2011 | 8.62% | -12.32% |
| 2010 | 28.44% | 8.6% |
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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $22,973 | 11.05% |
| SCHF | $10,000 | $17,089 | 6.43% |
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 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.
Current recommendations:
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.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
