The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the Vanguard Extended Market Index Fund ETF Shares (VXF) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VXF is a Vanguard Mid-Cap Growth fund. So, what’s the difference between VNQ and VXF? And which fund is better?
The expense ratio of VNQ is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided lower returns than VXF over the past ten years.
In this article, we’ll compare VNQ vs. VXF. We’ll look at annual returns and fund composition, as well as at their performance and industry exposure. Moreover, I’ll also discuss VNQ’s and VXF’s holdings, portfolio growth, and risk metrics and examine how these affect their overall returns.
Summary
| VNQ | VXF | |
| Name | Vanguard Real Estate Index Fund ETF Shares | Vanguard Extended Market Index Fund ETF Shares |
| Category | Real Estate | Mid-Cap Growth |
| Issuer | Vanguard | Vanguard |
| AUM | 77.34B | 114.53B |
| Avg. Return | 11.05% | 15.47% |
| Div. Yield | 2.34% | 1.19% |
| Expense Ratio | 0.12% | 0.06% |
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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.
VNQ’s dividend yield is 1.15% higher than that of VXF (2.34% vs. 1.19%). Also, VNQ yielded on average 4.42% less per year over the past decade (11.05% vs. 15.47%). The expense ratio of VNQ is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%).
Fund Composition
Industry Exposure
| VNQ | VXF | |
| Technology | 0.0% | 23.61% |
| Industrials | 0.0% | 11.31% |
| Energy | 0.0% | 2.46% |
| Communication Services | 0.0% | 7.29% |
| Utilities | 0.0% | 1.65% |
| Healthcare | 0.0% | 15.25% |
| Consumer Defensive | 0.0% | 3.09% |
| Real Estate | 100.0% | 8.16% |
| Financial Services | 0.0% | 12.56% |
| Consumer Cyclical | 0.0% | 11.35% |
| Basic Materials | 0.0% | 3.26% |
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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.
VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.
VNQ is 91.84% more exposed to the Real Estate sector than VXF (100.0% vs 8.16%). VNQ’s exposure to Technology and Industrials stocks is 23.61% lower and 11.31% lower respectively (0.0% vs. 23.61% and 0.0% vs. 11.31%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 27.00% less of the fund’s holdings compared to VXF (0.00% vs. 27.00%).
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%.
| VXF Holdings | Weight |
| Square Inc A | 1.2% |
| Zoom Video Communications Inc | 1.04% |
| Uber Technologies Inc | 0.93% |
| Moderna Inc | 0.9% |
| Blackstone Group Inc | 0.83% |
| Snap Inc Class A | 0.8% |
| Twilio Inc A | 0.73% |
| DocuSign Inc | 0.68% |
| CrowdStrike Holdings Inc Class A | 0.63% |
| Marvell Technology Inc | 0.6% |
VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.
Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.
Risk Analysis
| VNQ | VXF | |
| Mean Return | 0.89 | 1.24 |
| R-squared | 44.4 | 85.73 |
| Std. Deviation | 16.13 | 18.04 |
| Alpha | 2.47 | -3.26 |
| Beta | 0.76 | 1.23 |
| Sharpe Ratio | 0.62 | 0.79 |
| Treynor Ratio | 11.9 | 10.92 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Mean Return of 0.89 and a Alpha of 2.47. Its Sharpe Ratio is 0.62 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Standard Deviation of 16.13 and a Treynor Ratio of 11.9.
The Vanguard Extended Market Index Fund ETF Shares (VXF) has a Alpha of -3.26 with a Standard Deviation of 18.04 and a Treynor Ratio of 10.92. Its Sharpe Ratio is 0.79 while VXF’s Mean Return is 1.24. Furthermore, the fund has a Beta of 1.23 and a R-squared of 85.73.
VNQ’s Mean Return is 0.35 points lower than that of VXF and its R-squared is 41.33 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than VXF. The Alpha and Beta of VNQ are 5.73 points higher and 0.47 points lower than VXF’s Alpha and Beta.
Performance
Annual Returns
| Year | VNQ | VXF |
| 2020 | -4.72% | 32.19% |
| 2019 | 28.91% | 28.04% |
| 2018 | -5.95% | -9.37% |
| 2017 | 4.95% | 18.1% |
| 2016 | 8.53% | 16.16% |
| 2015 | 2.37% | -3.26% |
| 2014 | 30.29% | 7.55% |
| 2013 | 2.42% | 38.37% |
| 2012 | 17.67% | 18.48% |
| 2011 | 8.62% | -3.61% |
| 2010 | 28.44% | 27.55% |
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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| VXF | $10,000 | $44,130 | 15.47% |
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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.
VNQ’s CAGR is 4.42 percentage points lower than that of VXF and as a result, would have yielded $14,624 less on a $10,000 investment. Thus, VNQ performed worse than VXF by 4.42% annually.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
