The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between VTI and VNQ? And which fund is better?
The expense ratio of VTI is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%). VTI also has a higher exposure to the technology sector and a lower standard deviation. Overall, VTI has provided higher returns than VNQ over the past ten years.
In this article, we’ll compare VTI vs. VNQ. We’ll look at performance and risk metrics, as well as at their industry exposure and holdings. Moreover, I’ll also discuss VTI’s and VNQ’s fund composition, portfolio growth, and annual returns and examine how these affect their overall returns.
Summary
| VTI | VNQ | |
| Name | Vanguard Total Stock Market Index Fund ETF Shares | Vanguard Real Estate Index Fund ETF Shares |
| Category | Large Blend | Real Estate |
| Issuer | Vanguard | Vanguard |
| AUM | 1.26T | 77.34B |
| Avg. Return | 14.70% | 11.05% |
| Div. Yield | 1.26% | 2.34% |
| Expense Ratio | 0.03% | 0.12% |
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% 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%.
VTI’s dividend yield is 1.08% lower than that of VNQ (1.26% vs. 2.34%). Also, VTI yielded on average 3.65% more per year over the past decade (14.70% vs. 11.05%). The expense ratio of VTI is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%).
Fund Composition
Industry Exposure
| VTI | VNQ | |
| Technology | 24.1% | 0.0% |
| Industrials | 9.39% | 0.0% |
| Energy | 2.77% | 0.0% |
| Communication Services | 10.4% | 0.0% |
| Utilities | 2.29% | 0.0% |
| Healthcare | 13.64% | 0.0% |
| Consumer Defensive | 5.77% | 0.0% |
| Real Estate | 3.59% | 100.0% |
| Financial Services | 13.77% | 0.0% |
| Consumer Cyclical | 11.83% | 0.0% |
| Basic Materials | 2.44% | 0.0% |
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has the most exposure to the Technology sector at 24.1%. This is followed by Financial Services and Healthcare at 13.77% and 13.64% respectively. Basic Materials (2.44%), Energy (2.77%), and Real Estate (3.59%) only make up 8.80% of the fund’s total assets.
VTI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.77%, 9.39%, 10.4%, 11.83%, and 13.64%.
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%.
VTI is 24.10% more exposed to the Technology sector than VNQ (24.1% vs 0.0%). VTI’s exposure to Financial Services and Healthcare stocks is 13.77% higher and 13.64% higher respectively (13.77% vs. 0.0% and 13.64% vs. 0.0%). In total, Basic Materials, Energy, and Real Estate also make up 91.20% less of the fund’s holdings compared to VNQ (8.80% vs. 100.00%).
Holdings
| VTI Holdings | Weight |
| Apple Inc | 4.9% |
| Microsoft Corp | 4.6% |
| Amazon.com Inc | 3.33% |
| Facebook Inc Class A | 1.88% |
| Alphabet Inc Class A | 1.66% |
| Alphabet Inc Class C | 1.56% |
| Tesla Inc | 1.18% |
| Berkshire Hathaway Inc Class B | 1.09% |
| NVIDIA Corp | 1.07% |
| JPMorgan Chase & Co | 1.06% |
VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.
| 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%.
Risk Analysis
| VTI | VNQ | |
| Mean Return | 1.23 | 0.89 |
| R-squared | 99.24 | 44.4 |
| Std. Deviation | 14.15 | 16.13 |
| Alpha | -0.57 | 2.47 |
| Beta | 1.04 | 0.76 |
| Sharpe Ratio | 1 | 0.62 |
| Treynor Ratio | 13.58 | 11.9 |
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has a R-squared of 99.24 with a Alpha of -0.57 and a Treynor Ratio of 13.58. Its Beta is 1.04 while VTI’s Mean Return is 1.23. Furthermore, the fund has a Sharpe Ratio of 1 and a Standard Deviation of 14.15.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a R-squared of 44.4 and a Mean Return of 0.89. Its Standard Deviation is 16.13 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Treynor Ratio of 11.9 and a Sharpe Ratio of 0.62.
VTI’s Mean Return is 0.34 points higher than that of VNQ and its R-squared is 54.84 points higher. With a Standard Deviation of 14.15, VTI is slightly less volatile than VNQ. The Alpha and Beta of VTI are 3.04 points lower and 0.28 points higher than VNQ’s Alpha and Beta.
Performance
Annual Returns
| Year | VTI | VNQ |
| 2020 | 20.95% | -4.72% |
| 2019 | 30.8% | 28.91% |
| 2018 | -5.13% | -5.95% |
| 2017 | 21.16% | 4.95% |
| 2016 | 12.68% | 8.53% |
| 2015 | 0.4% | 2.37% |
| 2014 | 12.56% | 30.29% |
| 2013 | 33.51% | 2.42% |
| 2012 | 16.41% | 17.67% |
| 2011 | 1.06% | 8.62% |
| 2010 | 17.26% | 28.44% |
VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VTI | $10,000 | $42,648 | 14.70% |
| VNQ | $10,000 | $29,506 | 11.05% |
A $10,000 investment in VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
With a $10,000 investment in VNQ, the end total would have been $29,506. This equates to a $19,506 profit over 11 years and a compound annual growth rate (CAGR) of 11.05%.
VTI’s CAGR is 3.65 percentage points higher than that of VNQ and as a result, would have yielded $13,142 more on a $10,000 investment. Thus, VTI outperformed VNQ by 3.65% annually.
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