Skip to content

VNQ vs. VGK: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between VNQ and VGK? And which fund is better?

The expense ratio of VNQ is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided higher returns than VGK over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

VNQVGK
NameVanguard Real Estate Index Fund ETF SharesVanguard FTSE Europe Index Fund ETF Shares
CategoryReal EstateEurope Stock
IssuerVanguardVanguard
AUM77.34B25.7B
Avg. Return11.05%6.68%
Div. Yield2.34%2.52%
Expense Ratio0.12%0.08%

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 FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

VNQ’s dividend yield is 0.18% lower than that of VGK (2.34% vs. 2.52%). Also, VNQ yielded on average 4.37% more per year over the past decade (11.05% vs. 6.68%). The expense ratio of VNQ is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

VNQ vs. VGK - Industry Exposure

VNQVGK
Technology0.0%8.3%
Industrials0.0%15.58%
Energy0.0%4.3%
Communication Services0.0%5.09%
Utilities0.0%3.89%
Healthcare0.0%13.76%
Consumer Defensive0.0%11.39%
Real Estate100.0%2.57%
Financial Services0.0%15.85%
Consumer Cyclical0.0%11.6%
Basic Materials0.0%7.67%

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 FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

VNQ is 97.43% more exposed to the Real Estate sector than VGK (100.0% vs 2.57%). VNQ’s exposure to Technology and Industrials stocks is 8.30% lower and 15.58% lower respectively (0.0% vs. 8.3% and 0.0% vs. 15.58%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 38.84% less of the fund’s holdings compared to VGK (0.00% vs. 38.84%).

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%.

VGK - Holdings

VGK HoldingsWeight
Nestle SA2.82%
ASML Holding NV2.2%
Roche Holding AG2.13%
LVMH Moet Hennessy Louis Vuitton SE1.58%
Novartis AG1.55%
AstraZeneca PLC1.27%
SAP SE1.25%
Unilever PLC1.23%
Novo Nordisk A/S B1.09%
Siemens AG0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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).

Risk Analysis

VNQVGK
Mean Return0.890.61
R-squared44.492.76
Std. Deviation16.1316.65
Alpha2.470.45
Beta0.761.06
Sharpe Ratio0.620.4
Treynor Ratio11.95.12

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Standard Deviation of 16.65 with a Beta of 1.06 and a Alpha of 0.45. Its Treynor Ratio is 5.12 while VGK’s Sharpe Ratio is 0.4. Furthermore, the fund has a Mean Return of 0.61 and a R-squared of 92.76.

VNQ’s Mean Return is 0.28 points higher than that of VGK and its R-squared is 48.36 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than VGK. The Alpha and Beta of VNQ are 2.02 points higher and 0.30 points lower than VGK’s Alpha and Beta.

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!

Performance

Annual Returns

VNQ vs. VGK - Annual Returns

YearVNQVGK
2020-4.72%6.5%
201928.91%24.26%
2018-5.95%-14.79%
20174.95%27.06%
20168.53%-0.59%
20152.37%-1.87%
201430.29%-6.56%
20132.42%24.93%
201217.67%21.01%
20118.62%-11.49%
201028.44%5.01%

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 VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

VNQ vs. VGK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
VGK$10,000$18,3506.68%

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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

VNQ’s CAGR is 4.37 percentage points higher than that of VGK and as a result, would have yielded $11,156 more on a $10,000 investment. Thus, VNQ outperformed VGK by 4.37% 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.

Leave a Reply

Your email address will not be published.