The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard Total World Stock Index Fund ETF Shares (VT) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VT is a Vanguard N/A fund. So, what’s the difference between VNQ and VT? And which fund is better?
The expense ratio of VNQ is 0.04 percentage points higher than VT’s (0.12% vs. 0.08%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided higher returns than VT over the past ten years.
In this article, we’ll compare VNQ vs. VT. We’ll look at annual returns and portfolio growth, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss VNQ’s and VT’s holdings, performance, and fund composition and examine how these affect their overall returns.
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Summary
| VNQ | VT | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard Total World Stock Index Fund ETF Shares |
| Category | Real Estate | N/A |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 30.44B |
| Avg. Return | 11.05% | 10.42% |
| Div. Yield | 2.34% | 1.65% |
| 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 Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.
VNQ’s dividend yield is 0.69% higher than that of VT (2.34% vs. 1.65%). Also, VNQ yielded on average 0.63% more per year over the past decade (11.05% vs. 10.42%). The expense ratio of VNQ is 0.04 percentage points higher than VT’s (0.12% vs. 0.08%).
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Fund Composition
Industry Exposure
| VNQ | VT | |
| Technology | 0.0% | 19.63% |
| Industrials | 0.0% | 10.7% |
| Energy | 0.0% | 3.48% |
| Communication Services | 0.0% | 9.02% |
| Utilities | 0.0% | 2.6% |
| Healthcare | 0.0% | 11.58% |
| Consumer Defensive | 0.0% | 6.71% |
| Real Estate | 100.0% | 3.64% |
| Financial Services | 0.0% | 15.36% |
| Consumer Cyclical | 0.0% | 12.32% |
| Basic Materials | 0.0% | 4.97% |
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 Total World Stock Index Fund ETF Shares (VT) has the most exposure to the Technology sector at 19.63%. This is followed by Financial Services and Consumer Cyclical at 15.36% and 12.32% respectively. Energy (3.48%), Real Estate (3.64%), and Basic Materials (4.97%) only make up 12.09% of the fund’s total assets.
VT’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Industrials, Healthcare, and Consumer Cyclical stocks at 6.71%, 9.02%, 10.7%, 11.58%, and 12.32%.
VNQ is 96.36% more exposed to the Real Estate sector than VT (100.0% vs 3.64%). VNQ’s exposure to Technology and Industrials stocks is 19.63% lower and 10.70% lower respectively (0.0% vs. 19.63% and 0.0% vs. 10.7%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 34.39% less of the fund’s holdings compared to VT (0.00% vs. 34.39%).
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%.
| VT Holdings | Weight |
| Apple Inc | 2.85% |
| Microsoft Corp | 2.71% |
| Amazon.com Inc | 1.98% |
| Facebook Inc Class A | 1.1% |
| Alphabet Inc Class A | 0.97% |
| Alphabet Inc Class C | 0.95% |
| Tesla Inc | 0.7% |
| NVIDIA Corp | 0.64% |
| JPMorgan Chase & Co | 0.62% |
| Tencent Holdings Ltd | 0.6% |
VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.
Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.
Risk Analysis
| VNQ | VT | |
| Mean Return | 0.89 | 0.9 |
| R-squared | 44.4 | 99.35 |
| Std. Deviation | 16.13 | 14.19 |
| Alpha | 2.47 | 0.2 |
| Beta | 0.76 | 1.01 |
| Sharpe Ratio | 0.62 | 0.71 |
| Treynor Ratio | 11.9 | 9.5 |
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 Sharpe Ratio of 0.62. Its Mean Return is 0.89 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Beta of 0.76 and a Alpha of 2.47.
The Vanguard Total World Stock Index Fund ETF Shares (VT) has a Alpha of 0.2 with a Treynor Ratio of 9.5 and a Standard Deviation of 14.19. Its R-squared is 99.35 while VT’s Mean Return is 0.9. Furthermore, the fund has a Beta of 1.01 and a Sharpe Ratio of 0.71.
VNQ’s Mean Return is 0.01 points lower than that of VT and its R-squared is 54.95 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than VT. The Alpha and Beta of VNQ are 2.27 points higher and 0.25 points lower than VT’s Alpha and Beta.
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Performance
Annual Returns
| Year | VNQ | VT |
| 2020 | -4.72% | 16.74% |
| 2019 | 28.91% | 26.8% |
| 2018 | -5.95% | -9.67% |
| 2017 | 4.95% | 24.19% |
| 2016 | 8.53% | 8.77% |
| 2015 | 2.37% | -1.88% |
| 2014 | 30.29% | 3.97% |
| 2013 | 2.42% | 22.98% |
| 2012 | 17.67% | 17.33% |
| 2011 | 8.62% | -7.71% |
| 2010 | 28.44% | 13.05% |
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 2019 was the strongest year for VT, returning 26.8% on an annual basis. The poorest year for VT in the last ten years was 2018, with a yield of -9.67%. Most years the Vanguard Total World Stock Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 8.77%, 13.05%, and 16.74% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VT | $10,000 | $27,739 | 10.42% |
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 VT, the end total would have been $27,739. This equates to a $17,739 profit over 11 years and a compound annual growth rate (CAGR) of 10.42%.
VNQ’s CAGR is 0.63 percentage points higher than that of VT and as a result, would have yielded $1,767 more on a $10,000 investment. Thus, VNQ outperformed VT by 0.63% annually.
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