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VNQ vs. VHT: What’s The Difference?

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

The expense ratio of VNQ is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than VHT over the past ten years.

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

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Summary

VNQVHT
NameVanguard Real Estate Index Fund ETF SharesVanguard Health Care Index Fund ETF Shares
CategoryReal EstateHealth
IssuerVanguardVanguard
AUM77.34B17.94B
Avg. Return11.05%16.04%
Div. Yield2.34%1.15%
Expense Ratio0.12%0.1%

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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

VNQ’s dividend yield is 1.19% higher than that of VHT (2.34% vs. 1.15%). Also, VNQ yielded on average 4.99% less per year over the past decade (11.05% vs. 16.04%). The expense ratio of VNQ is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%).

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Fund Composition

Industry Exposure

VNQ vs. VHT - Industry Exposure

VNQVHT
Technology0.0%0.05%
Industrials0.0%0.05%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%0.0%
Healthcare0.0%99.57%
Consumer Defensive0.0%0.0%
Real Estate100.0%0.0%
Financial Services0.0%0.02%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.31%

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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

VNQ is 100.00% more exposed to the Real Estate sector than VHT (100.0% vs 0.0%). VNQ’s exposure to Technology and Industrials stocks is 0.05% lower and 0.05% lower respectively (0.0% vs. 0.05% and 0.0% vs. 0.05%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 0.02% less of the fund’s holdings compared to VHT (0.00% vs. 0.02%).

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%.

VHT - Holdings

VHT HoldingsWeight
Johnson & Johnson7.34%
UnitedHealth Group Inc6.44%
Pfizer Inc3.7%
Abbott Laboratories3.48%
Thermo Fisher Scientific Inc3.37%
AbbVie Inc3.37%
Merck & Co Inc3.33%
Eli Lilly and Co3.17%
Danaher Corp2.91%
Medtronic PLC2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

VNQVHT
Mean Return0.891.33
R-squared44.459.86
Std. Deviation16.1313.58
Alpha2.477.99
Beta0.760.75
Sharpe Ratio0.621.13
Treynor Ratio11.920.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Sharpe Ratio of 1.13 with a Treynor Ratio of 20.74 and a Alpha of 7.99. Its R-squared is 59.86 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Mean Return of 1.33 and a Beta of 0.75.

VNQ’s Mean Return is 0.44 points lower than that of VHT and its R-squared is 15.46 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than VHT. The Alpha and Beta of VNQ are 5.52 points lower and 0.01 points higher than VHT’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. VHT - Annual Returns

YearVNQVHT
2020-4.72%18.21%
201928.91%21.97%
2018-5.95%5.55%
20174.95%23.34%
20168.53%-3.33%
20152.37%7.22%
201430.29%25.38%
20132.42%42.67%
201217.67%19.1%
20118.62%10.57%
201028.44%5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

VNQ vs. VHT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
VHT$10,000$48,46416.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

VNQ’s CAGR is 4.99 percentage points lower than that of VHT and as a result, would have yielded $18,958 less on a $10,000 investment. Thus, VNQ performed worse than VHT by 4.99% annually.


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