The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between VNQ and SCHG? And which fund is better?
The expense ratio of VNQ is 0.08 percentage points higher than SCHG’s (0.12% vs. 0.04%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than SCHG over the past ten years.
In this article, we’ll compare VNQ vs. SCHG. We’ll look at portfolio growth and fund composition, as well as at their performance and industry exposure. Moreover, I’ll also discuss VNQ’s and SCHG’s risk metrics, annual returns, and holdings and examine how these affect their overall returns.
Summary
| VNQ | SCHG | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Schwab U.S. Large-Cap Growth ETF |
| Category | Real Estate | Large Growth |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 77.34B | 15.16B |
| Avg. Return | 11.05% | 17.81% |
| Div. Yield | 2.34% | 0.43% |
| Expense Ratio | 0.12% | 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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.
VNQ’s dividend yield is 1.91% higher than that of SCHG (2.34% vs. 0.43%). Also, VNQ yielded on average 6.76% less per year over the past decade (11.05% vs. 17.81%). The expense ratio of VNQ is 0.08 percentage points higher than SCHG’s (0.12% vs. 0.04%).
Fund Composition
Industry Exposure
| VNQ | SCHG | |
| Technology | 0.0% | 39.21% |
| Industrials | 0.0% | 3.01% |
| Energy | 0.0% | 0.2% |
| Communication Services | 0.0% | 17.07% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 0.0% | 12.05% |
| Consumer Defensive | 0.0% | 2.15% |
| Real Estate | 100.0% | 1.64% |
| Financial Services | 0.0% | 7.98% |
| Consumer Cyclical | 0.0% | 15.01% |
| Basic Materials | 0.0% | 1.68% |
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. Large-Cap Growth ETF (SCHG) has the most exposure to the Technology sector at 39.21%. This is followed by Communication Services and Consumer Cyclical at 17.07% and 15.01% respectively. Energy (0.2%), Real Estate (1.64%), and Basic Materials (1.68%) only make up 3.52% of the fund’s total assets.
SCHG’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 2.15%, 3.01%, 7.98%, 12.05%, and 15.01%.
VNQ is 98.36% more exposed to the Real Estate sector than SCHG (100.0% vs 1.64%). VNQ’s exposure to Technology and Industrials stocks is 39.21% lower and 3.01% lower respectively (0.0% vs. 39.21% and 0.0% vs. 3.01%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 25.14% less of the fund’s holdings compared to SCHG (0.00% vs. 25.14%).
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%.
| SCHG Holdings | Weight |
| Apple Inc | 11.49% |
| Microsoft Corp | 10.91% |
| Amazon.com Inc | 7.89% |
| Facebook Inc A | 4.45% |
| Alphabet Inc A | 3.93% |
| Alphabet Inc Class C | 3.82% |
| Tesla Inc | 2.8% |
| NVIDIA Corp | 2.67% |
| Visa Inc Class A | 2.12% |
| UnitedHealth Group Inc | 2.02% |
SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.
Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.
Risk Analysis
| VNQ | SCHG | |
| Mean Return | 0.89 | 1.46 |
| R-squared | 44.4 | 92.92 |
| Std. Deviation | 16.13 | 14.78 |
| Alpha | 2.47 | 1.97 |
| Beta | 0.76 | 1.05 |
| Sharpe Ratio | 0.62 | 1.14 |
| Treynor Ratio | 11.9 | 16.3 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Sharpe Ratio of 0.62 with a Mean Return of 0.89 and a Standard Deviation of 16.13. Its Beta is 0.76 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Treynor Ratio of 11.9 and a Alpha of 2.47.
The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Standard Deviation of 14.78 with a R-squared of 92.92 and a Alpha of 1.97. Its Sharpe Ratio is 1.14 while SCHG’s Mean Return is 1.46. Furthermore, the fund has a Treynor Ratio of 16.3 and a Beta of 1.05.
VNQ’s Mean Return is 0.57 points lower than that of SCHG and its R-squared is 48.52 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than SCHG. The Alpha and Beta of VNQ are 0.50 points higher and 0.29 points lower than SCHG’s Alpha and Beta.
Performance
Annual Returns
| Year | VNQ | SCHG |
| 2020 | -4.72% | 39.13% |
| 2019 | 28.91% | 36.21% |
| 2018 | -5.95% | -1.35% |
| 2017 | 4.95% | 28.04% |
| 2016 | 8.53% | 6.76% |
| 2015 | 2.37% | 3.26% |
| 2014 | 30.29% | 15.74% |
| 2013 | 2.42% | 33.96% |
| 2012 | 17.67% | 17.02% |
| 2011 | 8.62% | -0.67% |
| 2010 | 28.44% | 16.83% |
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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $22,973 | 11.05% |
| SCHG | $10,000 | $47,556 | 17.81% |
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 SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.
VNQ’s CAGR is 6.76 percentage points lower than that of SCHG and as a result, would have yielded $24,583 less on a $10,000 investment. Thus, VNQ performed worse than SCHG by 6.76% annually.
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