The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between VNQ and VBK? And which fund is better?
The expense ratio of VNQ is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided lower returns than VBK over the past ten years.
In this article, we’ll compare VNQ vs. VBK. We’ll look at holdings and industry exposure, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss VNQ’s and VBK’s annual returns, performance, and fund composition and examine how these affect their overall returns.
Summary
| VNQ | VBK | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard Small-Cap Growth Index Fund ETF Shares |
| Category | Real Estate | Small Growth |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 37.89B |
| Avg. Return | 11.05% | 16.53% |
| Div. Yield | 2.34% | 0.45% |
| Expense Ratio | 0.12% | 0.07% |
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.
VNQ’s dividend yield is 1.89% higher than that of VBK (2.34% vs. 0.45%). Also, VNQ yielded on average 5.48% less per year over the past decade (11.05% vs. 16.53%). The expense ratio of VNQ is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%).
Fund Composition
Industry Exposure
| VNQ | VBK | |
| Technology | 0.0% | 27.87% |
| Industrials | 0.0% | 13.19% |
| Energy | 0.0% | 1.77% |
| Communication Services | 0.0% | 3.24% |
| Utilities | 0.0% | 0.32% |
| Healthcare | 0.0% | 23.24% |
| Consumer Defensive | 0.0% | 3.83% |
| Real Estate | 100.0% | 7.87% |
| Financial Services | 0.0% | 4.05% |
| Consumer Cyclical | 0.0% | 12.13% |
| Basic Materials | 0.0% | 2.49% |
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.
VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.
VNQ is 92.13% more exposed to the Real Estate sector than VBK (100.0% vs 7.87%). VNQ’s exposure to Technology and Industrials stocks is 27.87% lower and 13.19% lower respectively (0.0% vs. 27.87% and 0.0% vs. 13.19%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 20.01% less of the fund’s holdings compared to VBK (0.00% vs. 20.01%).
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%.
| VBK Holdings | Weight |
| Charles River Laboratories International Inc | 0.78% |
| Pool Corp | 0.73% |
| Bio-Techne Corp | 0.73% |
| Avantor Inc | 0.73% |
| PerkinElmer Inc | 0.72% |
| Entegris Inc | 0.7% |
| PTC Inc | 0.62% |
| Fair Isaac Corp | 0.57% |
| Bill.com Holdings Inc Ordinary Shares | 0.56% |
| Avalara Inc | 0.55% |
VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.
Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.
Risk Analysis
| VNQ | VBK | |
| Mean Return | 0.89 | 1.22 |
| R-squared | 44.4 | 80.56 |
| Std. Deviation | 16.13 | 17.95 |
| Alpha | 2.47 | -2.81 |
| Beta | 0.76 | 1.18 |
| Sharpe Ratio | 0.62 | 0.78 |
| Treynor Ratio | 11.9 | 11.18 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Treynor Ratio of 11.9 with a Standard Deviation of 16.13 and a R-squared of 44.4. Its Mean Return is 0.89 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Sharpe Ratio of 0.62 and a Beta of 0.76.
The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Beta of 1.18 with a Mean Return of 1.22 and a Treynor Ratio of 11.18. Its Alpha is -2.81 while VBK’s Standard Deviation is 17.95. Furthermore, the fund has a R-squared of 80.56 and a Sharpe Ratio of 0.78.
VNQ’s Mean Return is 0.33 points lower than that of VBK and its R-squared is 36.16 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than VBK. The Alpha and Beta of VNQ are 5.28 points higher and 0.42 points lower than VBK’s Alpha and Beta.
Performance
Annual Returns
| Year | VNQ | VBK |
| 2020 | -4.72% | 35.29% |
| 2019 | 28.91% | 32.75% |
| 2018 | -5.95% | -5.68% |
| 2017 | 4.95% | 21.9% |
| 2016 | 8.53% | 10.74% |
| 2015 | 2.37% | -2.51% |
| 2014 | 30.29% | 4.02% |
| 2013 | 2.42% | 38.18% |
| 2012 | 17.67% | 17.67% |
| 2011 | 8.62% | -1.43% |
| 2010 | 28.44% | 30.87% |
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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VBK | $10,000 | $48,639 | 16.53% |
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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.
VNQ’s CAGR is 5.48 percentage points lower than that of VBK and as a result, would have yielded $19,133 less on a $10,000 investment. Thus, VNQ performed worse than VBK by 5.48% annually.
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