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VNQ vs. SDY: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between VNQ and SDY? And which fund is better?

The expense ratio of VNQ is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than SDY over the past ten years.

In this article, we’ll compare VNQ vs. SDY. We’ll look at fund composition and portfolio growth, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VNQ’s and SDY’s risk metrics, holdings, and performance and examine how these affect their overall returns.

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Summary

VNQSDY
NameVanguard Real Estate Index Fund ETF SharesSPDR S&P Dividend ETF
CategoryReal EstateLarge Value
IssuerVanguardSPDR State Street Global Advisors
AUM77.34B19.67B
Avg. Return11.05%12.44%
Div. Yield2.34%2.65%
Expense Ratio0.12%0.35%

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 SPDR S&P Dividend ETF (SDY) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 19.67B total assets under management and has yielded an average annual return of 12.44% over the past 10 years. The fund has a dividend yield of 2.65% with an expense ratio of 0.35%.

VNQ’s dividend yield is 0.31% lower than that of SDY (2.34% vs. 2.65%). Also, VNQ yielded on average 1.39% less per year over the past decade (11.05% vs. 12.44%). The expense ratio of VNQ is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%).

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Fund Composition

Industry Exposure

VNQ vs. SDY - Industry Exposure

VNQSDY
Technology0.0%2.0%
Industrials0.0%15.89%
Energy0.0%5.95%
Communication Services0.0%4.64%
Utilities0.0%12.14%
Healthcare0.0%7.35%
Consumer Defensive0.0%14.01%
Real Estate100.0%6.57%
Financial Services0.0%16.32%
Consumer Cyclical0.0%8.68%
Basic Materials0.0%6.45%

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 SPDR S&P Dividend ETF (SDY) has the most exposure to the Financial Services sector at 16.32%. This is followed by Industrials and Consumer Defensive at 15.89% and 14.01% respectively. Communication Services (4.64%), Energy (5.95%), and Basic Materials (6.45%) only make up 17.04% of the fund’s total assets.

SDY’s mid-section with moderate exposure is comprised of Real Estate, Healthcare, Consumer Cyclical, Utilities, and Consumer Defensive stocks at 6.57%, 7.35%, 8.68%, 12.14%, and 14.01%.

VNQ is 93.43% more exposed to the Real Estate sector than SDY (100.0% vs 6.57%). VNQ’s exposure to Technology and Industrials stocks is 2.00% lower and 15.89% lower respectively (0.0% vs. 2.0% and 0.0% vs. 15.89%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 39.01% less of the fund’s holdings compared to SDY (0.00% vs. 39.01%).

Holdings

VNQ - Holdings

VNQ HoldingsWeight
Vanguard Real Estate II Index11.62%
American Tower Corp7.24%
Prologis Inc5.33%
Crown Castle International Corp5.01%
Equinix Inc4.3%
Public Storage2.85%
Simon Property Group Inc2.52%
Digital Realty Trust Inc2.49%
SBA Communications Corp2.1%
Welltower Inc2.09%

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%.

SDY - Holdings

SDY HoldingsWeight
Exxon Mobil Corp2.81%
AT&T Inc2.5%
South Jersey Industries Inc2.22%
Chevron Corp2.02%
International Business Machines Corp2.0%
AbbVie Inc1.93%
National Retail Properties Inc1.86%
Federal Realty Investment Trust1.77%
Realty Income Corp1.7%
Old Republic International Corp1.65%

SDY’s Top Holdings are Exxon Mobil Corp, AT&T Inc, South Jersey Industries Inc, Chevron Corp, and International Business Machines Corp at 2.81%, 2.5%, 2.22%, 2.02%, and 2.0%.

AbbVie Inc (1.93%), National Retail Properties Inc (1.86%), and Federal Realty Investment Trust (1.77%) have a slightly smaller but still significant weight. Realty Income Corp and Old Republic International Corp are also represented in the SDY’s holdings at 1.7% and 1.65%.

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Risk Analysis

VNQSDY
Mean Return0.891.07
R-squared44.483.62
Std. Deviation16.1312.9
Alpha2.47-0.1
Beta0.760.87
Sharpe Ratio0.620.95
Treynor Ratio11.913.94

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Mean Return of 0.89 with a R-squared of 44.4 and a Sharpe Ratio of 0.62. Its Standard Deviation is 16.13 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Beta of 0.76 and a Treynor Ratio of 11.9.

The SPDR S&P Dividend ETF (SDY) has a Alpha of -0.1 with a Standard Deviation of 12.9 and a R-squared of 83.62. Its Sharpe Ratio is 0.95 while SDY’s Treynor Ratio is 13.94. Furthermore, the fund has a Mean Return of 1.07 and a Beta of 0.87.

VNQ’s Mean Return is 0.18 points lower than that of SDY and its R-squared is 39.22 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than SDY. The Alpha and Beta of VNQ are 2.57 points higher and 0.11 points lower than SDY’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. SDY - Annual Returns

YearVNQSDY
2020-4.72%1.78%
201928.91%23.37%
2018-5.95%-2.73%
20174.95%15.84%
20168.53%20.17%
20152.37%-0.7%
201430.29%13.8%
20132.42%30.09%
201217.67%11.51%
20118.62%7.28%
201028.44%16.41%

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 SDY, returning 30.09% on an annual basis. The poorest year for SDY in the last ten years was 2018, with a yield of -2.73%. Most years the SPDR S&P Dividend ETF has given investors modest returns, such as in 2012, 2014, and 2017, when gains were 11.51%, 13.8%, and 15.84% respectively.

Portfolio Growth

VNQ vs. SDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
SDY$10,000$34,80612.44%

A $10,000 investment in VNQ would have resulted in a final balance of $29,506. This is a profit of $19,506 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.05%.

With a $10,000 investment in SDY, the end total would have been $34,806. This equates to a $24,806 profit over 11 years and a compound annual growth rate (CAGR) of 12.44%.

VNQ’s CAGR is 1.39 percentage points lower than that of SDY and as a result, would have yielded $5,300 less on a $10,000 investment. Thus, VNQ performed worse than SDY by 1.39% annually.


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