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VNQ vs. VV: What’s The Difference?

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

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

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

Summary

VNQVV
NameVanguard Real Estate Index Fund ETF SharesVanguard Large-Cap Index Fund ETF Shares
CategoryReal EstateLarge Blend
IssuerVanguardVanguard
AUM77.34B37.65B
Avg. Return11.05%14.75%
Div. Yield2.34%1.26%
Expense Ratio0.12%0.04%

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 Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.

VNQ’s dividend yield is 1.08% higher than that of VV (2.34% vs. 1.26%). Also, VNQ yielded on average 3.70% less per year over the past decade (11.05% vs. 14.75%). The expense ratio of VNQ is 0.08 percentage points higher than VV’s (0.12% vs. 0.04%).

Fund Composition

Industry Exposure

VNQ vs. VV - Industry Exposure

VNQVV
Technology0.0%25.38%
Industrials0.0%8.39%
Energy0.0%2.62%
Communication Services0.0%11.68%
Utilities0.0%2.35%
Healthcare0.0%13.22%
Consumer Defensive0.0%6.06%
Real Estate100.0%2.7%
Financial Services0.0%13.82%
Consumer Cyclical0.0%11.65%
Basic Materials0.0%2.13%

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 Large-Cap Index Fund ETF Shares (VV) has the most exposure to the Technology sector at 25.38%. This is followed by Financial Services and Healthcare at 13.82% and 13.22% respectively. Utilities (2.35%), Energy (2.62%), and Real Estate (2.7%) only make up 7.67% of the fund’s total assets.

VV’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 6.06%, 8.39%, 11.65%, 11.68%, and 13.22%.

VNQ is 97.30% more exposed to the Real Estate sector than VV (100.0% vs 2.7%). VNQ’s exposure to Technology and Industrials stocks is 25.38% lower and 8.39% lower respectively (0.0% vs. 25.38% and 0.0% vs. 8.39%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 31.53% less of the fund’s holdings compared to VV (0.00% vs. 31.53%).

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%.

VV - Holdings

VV HoldingsWeight
Apple Inc5.7%
Microsoft Corp5.35%
Amazon.com Inc3.87%
Facebook Inc Class A2.19%
Alphabet Inc Class A1.93%
Alphabet Inc Class C1.81%
Tesla Inc1.37%
Berkshire Hathaway Inc Class B1.3%
NVIDIA Corp1.24%
JPMorgan Chase & Co1.24%

VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.

Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.

Risk Analysis

VNQVV
Mean Return0.891.24
R-squared44.499.86
Std. Deviation16.1313.75
Alpha2.47-0.08
Beta0.761.01
Sharpe Ratio0.621.04
Treynor Ratio11.914.14

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

The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Standard Deviation of 13.75 with a Alpha of -0.08 and a Treynor Ratio of 14.14. Its Sharpe Ratio is 1.04 while VV’s Mean Return is 1.24. Furthermore, the fund has a R-squared of 99.86 and a Beta of 1.01.

VNQ’s Mean Return is 0.35 points lower than that of VV and its R-squared is 55.46 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than VV. The Alpha and Beta of VNQ are 2.55 points higher and 0.25 points lower than VV’s Alpha and Beta.

Performance

Annual Returns

VNQ vs. VV - Annual Returns

YearVNQVV
2020-4.72%20.99%
201928.91%31.39%
2018-5.95%-4.44%
20174.95%22.03%
20168.53%11.65%
20152.37%1.07%
201430.29%13.39%
20132.42%32.65%
201217.67%16.09%
20118.62%1.58%
201028.44%15.81%

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 VV, returning 32.65% on an annual basis. The poorest year for VV in the last ten years was 2018, with a yield of -4.44%. Most years the Vanguard Large-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.39%, 15.81%, and 16.09% respectively.

Portfolio Growth

VNQ vs. VV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
VV$10,000$42,97014.75%

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 VV, the end total would have been $42,970. This equates to a $32,970 profit over 11 years and a compound annual growth rate (CAGR) of 14.75%.

VNQ’s CAGR is 3.70 percentage points lower than that of VV and as a result, would have yielded $13,464 less on a $10,000 investment. Thus, VNQ performed worse than VV by 3.70% annually.


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