The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VOE is a Vanguard Mid-Cap Value fund. So, what’s the difference between VNQ and VOE? And which fund is better?
The expense ratio of VNQ is 0.05 percentage points higher than VOE’s (0.12% vs. 0.07%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than VOE over the past ten years.
In this article, we’ll compare VNQ vs. VOE. We’ll look at portfolio growth and risk metrics, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss VNQ’s and VOE’s holdings, annual returns, and performance and examine how these affect their overall returns.
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Summary
| VNQ | VOE | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard Mid-Cap Value Index Fund ETF Shares |
| Category | Real Estate | Mid-Cap Value |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 26.78B |
| Avg. Return | 11.05% | 12.52% |
| Div. Yield | 2.34% | 1.87% |
| 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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.
VNQ’s dividend yield is 0.47% higher than that of VOE (2.34% vs. 1.87%). Also, VNQ yielded on average 1.48% less per year over the past decade (11.05% vs. 12.52%). The expense ratio of VNQ is 0.05 percentage points higher than VOE’s (0.12% vs. 0.07%).
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Fund Composition
Industry Exposure
| VNQ | VOE | |
| Technology | 0.0% | 9.85% |
| Industrials | 0.0% | 9.4% |
| Energy | 0.0% | 5.69% |
| Communication Services | 0.0% | 5.27% |
| Utilities | 0.0% | 10.93% |
| Healthcare | 0.0% | 7.04% |
| Consumer Defensive | 0.0% | 4.85% |
| Real Estate | 100.0% | 11.48% |
| Financial Services | 0.0% | 18.26% |
| Consumer Cyclical | 0.0% | 11.8% |
| Basic Materials | 0.0% | 5.44% |
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 Mid-Cap Value Index Fund ETF Shares (VOE) has the most exposure to the Financial Services sector at 18.26%. This is followed by Consumer Cyclical and Real Estate at 11.8% and 11.48% respectively. Communication Services (5.27%), Basic Materials (5.44%), and Energy (5.69%) only make up 16.40% of the fund’s total assets.
VOE’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Technology, Utilities, and Real Estate stocks at 7.04%, 9.4%, 9.85%, 10.93%, and 11.48%.
VNQ is 88.52% more exposed to the Real Estate sector than VOE (100.0% vs 11.48%). VNQ’s exposure to Technology and Industrials stocks is 9.85% lower and 9.40% lower respectively (0.0% vs. 9.85% and 0.0% vs. 9.4%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 34.91% less of the fund’s holdings compared to VOE (0.00% vs. 34.91%).
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%.
| VOE Holdings | Weight |
| Carrier Global Corp Ordinary Shares | 1.28% |
| International Flavors & Fragrances Inc | 1.13% |
| Motorola Solutions Inc | 1.12% |
| Discover Financial Services | 1.09% |
| Welltower Inc | 1.05% |
| Corteva Inc | 0.99% |
| Valero Energy Corp | 0.97% |
| Corning Inc | 0.95% |
| Willis Towers Watson PLC | 0.9% |
| D.R. Horton Inc | 0.89% |
VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.
Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.
Risk Analysis
| VNQ | VOE | |
| Mean Return | 0.89 | 1.05 |
| R-squared | 44.4 | 88.76 |
| Std. Deviation | 16.13 | 15.98 |
| Alpha | 2.47 | -3.77 |
| Beta | 0.76 | 1.11 |
| Sharpe Ratio | 0.62 | 0.75 |
| Treynor Ratio | 11.9 | 10.19 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Mean Return of 0.89 with a Sharpe Ratio of 0.62 and a Alpha of 2.47. Its Treynor Ratio is 11.9 while VNQ’s Standard Deviation is 16.13. Furthermore, the fund has a Beta of 0.76 and a R-squared of 44.4.
The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Alpha of -3.77 with a R-squared of 88.76 and a Sharpe Ratio of 0.75. Its Mean Return is 1.05 while VOE’s Standard Deviation is 15.98. Furthermore, the fund has a Treynor Ratio of 10.19 and a Beta of 1.11.
VNQ’s Mean Return is 0.16 points lower than that of VOE and its R-squared is 44.36 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than VOE. The Alpha and Beta of VNQ are 6.24 points higher and 0.35 points lower than VOE’s Alpha and Beta.
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Performance
Annual Returns
| Year | VNQ | VOE |
| 2020 | -4.72% | 2.5% |
| 2019 | 28.91% | 27.98% |
| 2018 | -5.95% | -12.41% |
| 2017 | 4.95% | 17.05% |
| 2016 | 8.53% | 15.26% |
| 2015 | 2.37% | -1.8% |
| 2014 | 30.29% | 13.98% |
| 2013 | 2.42% | 37.65% |
| 2012 | 17.67% | 16.04% |
| 2011 | 8.62% | -0.32% |
| 2010 | 28.44% | 21.83% |
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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VOE | $10,000 | $33,655 | 12.52% |
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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.
VNQ’s CAGR is 1.48 percentage points lower than that of VOE and as a result, would have yielded $4,149 less on a $10,000 investment. Thus, VNQ performed worse than VOE by 1.48% annually.
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