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
| VNQ | VV | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard Large-Cap Index Fund ETF Shares |
| Category | Real Estate | Large Blend |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 37.65B |
| Avg. Return | 11.05% | 14.75% |
| Div. Yield | 2.34% | 1.26% |
| Expense Ratio | 0.12% | 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 | VV | |
| Technology | 0.0% | 25.38% |
| Industrials | 0.0% | 8.39% |
| Energy | 0.0% | 2.62% |
| Communication Services | 0.0% | 11.68% |
| Utilities | 0.0% | 2.35% |
| Healthcare | 0.0% | 13.22% |
| Consumer Defensive | 0.0% | 6.06% |
| Real Estate | 100.0% | 2.7% |
| Financial Services | 0.0% | 13.82% |
| Consumer Cyclical | 0.0% | 11.65% |
| Basic Materials | 0.0% | 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 | 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%.
| VV Holdings | Weight |
| Apple Inc | 5.7% |
| Microsoft Corp | 5.35% |
| Amazon.com Inc | 3.87% |
| Facebook Inc Class A | 2.19% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.81% |
| Tesla Inc | 1.37% |
| Berkshire Hathaway Inc Class B | 1.3% |
| NVIDIA Corp | 1.24% |
| JPMorgan Chase & Co | 1.24% |
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
| VNQ | VV | |
| Mean Return | 0.89 | 1.24 |
| R-squared | 44.4 | 99.86 |
| Std. Deviation | 16.13 | 13.75 |
| Alpha | 2.47 | -0.08 |
| Beta | 0.76 | 1.01 |
| Sharpe Ratio | 0.62 | 1.04 |
| Treynor Ratio | 11.9 | 14.14 |
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
| Year | VNQ | VV |
| 2020 | -4.72% | 20.99% |
| 2019 | 28.91% | 31.39% |
| 2018 | -5.95% | -4.44% |
| 2017 | 4.95% | 22.03% |
| 2016 | 8.53% | 11.65% |
| 2015 | 2.37% | 1.07% |
| 2014 | 30.29% | 13.39% |
| 2013 | 2.42% | 32.65% |
| 2012 | 17.67% | 16.09% |
| 2011 | 8.62% | 1.58% |
| 2010 | 28.44% | 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
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VV | $10,000 | $42,970 | 14.75% |
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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