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.
Summary
| VNQ | VGK | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard FTSE Europe Index Fund ETF Shares |
| Category | Real Estate | Europe Stock |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 25.7B |
| Avg. Return | 11.05% | 6.68% |
| Div. Yield | 2.34% | 2.52% |
| Expense Ratio | 0.12% | 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%).
Fund Composition
Industry Exposure
| VNQ | VGK | |
| Technology | 0.0% | 8.3% |
| Industrials | 0.0% | 15.58% |
| Energy | 0.0% | 4.3% |
| Communication Services | 0.0% | 5.09% |
| Utilities | 0.0% | 3.89% |
| Healthcare | 0.0% | 13.76% |
| Consumer Defensive | 0.0% | 11.39% |
| Real Estate | 100.0% | 2.57% |
| Financial Services | 0.0% | 15.85% |
| Consumer Cyclical | 0.0% | 11.6% |
| Basic Materials | 0.0% | 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 | 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%.
| VGK Holdings | Weight |
| Nestle SA | 2.82% |
| ASML Holding NV | 2.2% |
| Roche Holding AG | 2.13% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.58% |
| Novartis AG | 1.55% |
| AstraZeneca PLC | 1.27% |
| SAP SE | 1.25% |
| Unilever PLC | 1.23% |
| Novo Nordisk A/S B | 1.09% |
| Siemens AG | 0.96% |
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%.
Risk Analysis
| VNQ | VGK | |
| Mean Return | 0.89 | 0.61 |
| R-squared | 44.4 | 92.76 |
| Std. Deviation | 16.13 | 16.65 |
| Alpha | 2.47 | 0.45 |
| Beta | 0.76 | 1.06 |
| Sharpe Ratio | 0.62 | 0.4 |
| Treynor Ratio | 11.9 | 5.12 |
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.
Performance
Annual Returns
| Year | VNQ | VGK |
| 2020 | -4.72% | 6.5% |
| 2019 | 28.91% | 24.26% |
| 2018 | -5.95% | -14.79% |
| 2017 | 4.95% | 27.06% |
| 2016 | 8.53% | -0.59% |
| 2015 | 2.37% | -1.87% |
| 2014 | 30.29% | -6.56% |
| 2013 | 2.42% | 24.93% |
| 2012 | 17.67% | 21.01% |
| 2011 | 8.62% | -11.49% |
| 2010 | 28.44% | 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
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VGK | $10,000 | $18,350 | 6.68% |
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.
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