VOO vs. VNQ: What’s The Difference?

The Vanguard S&P 500 ETF (VOO) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between VOO and VNQ? And which fund is better?

The expense ratio of VOO is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%). VOO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VOO has provided higher returns than VNQ over the past ten years.

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

Summary

VOO VNQ
Name Vanguard S&P 500 ETF Vanguard Real Estate Index Fund ETF Shares
Category Large Blend Real Estate
Issuer Vanguard Vanguard
AUM 753.41B 77.34B
Avg. Return 14.45% 11.05%
Div. Yield 1.34% 2.34%
Expense Ratio 0.03% 0.12%

The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.

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%.

VOO’s dividend yield is 1.00% lower than that of VNQ (1.34% vs. 2.34%). Also, VOO yielded on average 3.40% more per year over the past decade (14.45% vs. 11.05%). The expense ratio of VOO is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%).

Fund Composition

Industry Exposure

VOO vs. VNQ - Industry Exposure

VOO VNQ
Technology 24.24% 0.0%
Industrials 8.86% 0.0%
Energy 2.84% 0.0%
Communication Services 11.14% 0.0%
Utilities 2.43% 0.0%
Healthcare 13.1% 0.0%
Consumer Defensive 6.32% 0.0%
Real Estate 2.58% 100.0%
Financial Services 14.2% 0.0%
Consumer Cyclical 12.01% 0.0%
Basic Materials 2.27% 0.0%

The Vanguard S&P 500 ETF (VOO) has the most exposure to the Technology sector at 24.24%. This is followed by Financial Services and Healthcare at 14.2% and 13.1% respectively. Utilities (2.43%), Real Estate (2.58%), and Energy (2.84%) only make up 7.85% of the fund’s total assets.

VOO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 6.32%, 8.86%, 11.14%, 12.01%, and 13.1%.

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%.

VOO is 24.24% more exposed to the Technology sector than VNQ (24.24% vs 0.0%). VOO’s exposure to Financial Services and Healthcare stocks is 14.20% higher and 13.10% higher respectively (14.2% vs. 0.0% and 13.1% vs. 0.0%). In total, Utilities, Real Estate, and Energy also make up 92.15% less of the fund’s holdings compared to VNQ (7.85% vs. 100.00%).

Holdings

VOO - Holdings

VOO Holdings Weight
Apple Inc 5.92%
Microsoft Corp 5.62%
Amazon.com Inc 4.06%
Facebook Inc Class A 2.29%
Alphabet Inc Class A 2.02%
Alphabet Inc Class C 1.97%
Tesla Inc 1.44%
Berkshire Hathaway Inc Class B 1.44%
NVIDIA Corp 1.37%
JPMorgan Chase & Co 1.3%

VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.

Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.

VNQ - 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%.

Performance

Annual Returns

VOO vs. VNQ - Annual Returns

Year VOO VNQ
2020 18.35% -4.72%
2019 31.46% 28.91%
2018 -4.42% -5.95%
2017 21.78% 4.95%
2016 11.93% 8.53%
2015 1.35% 2.37%
2014 13.63% 30.29%
2013 32.33% 2.42%
2012 15.98% 17.67%
2011 2.09% 8.62%
2010 0.0% 28.44%

VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% respectively.

The year 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.

Portfolio Growth

VOO vs. VNQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VOO $10,000 $36,575 14.45%
VNQ $10,000 $22,973 11.05%

A $10,000 investment in VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.

With a $10,000 investment in VNQ, the end total would have been $22,973. This equates to a $12,973 profit over 10 years and a compound annual growth rate (CAGR) of 11.05%.

VOO’s CAGR is 3.40 percentage points higher than that of VNQ and as a result, would have yielded $13,602 more on a $10,000 investment. Thus, VOO outperformed VNQ by 3.40% annually.


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