VTV vs. VNQ: What’s The Difference?

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

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

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

Summary

VTV VNQ
Name Vanguard Value Index Fund ETF Shares Vanguard Real Estate Index Fund ETF Shares
Category Large Value Real Estate
Issuer Vanguard Vanguard
AUM 125.77B 77.34B
Avg. Return 12.07% 11.05%
Div. Yield 2.15% 2.34%
Expense Ratio 0.04% 0.12%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 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%.

VTV’s dividend yield is 0.19% lower than that of VNQ (2.15% vs. 2.34%). Also, VTV yielded on average 1.03% more per year over the past decade (12.07% vs. 11.05%). The expense ratio of VTV is 0.08 percentage points lower than VNQ’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VTV vs. VNQ - Industry Exposure

VTV VNQ
Technology 7.86% 0.0%
Industrials 12.61% 0.0%
Energy 5.59% 0.0%
Communication Services 5.49% 0.0%
Utilities 5.37% 0.0%
Healthcare 19.84% 0.0%
Consumer Defensive 10.72% 0.0%
Real Estate 3.01% 100.0%
Financial Services 22.81% 0.0%
Consumer Cyclical 3.79% 0.0%
Basic Materials 2.91% 0.0%

The Vanguard Value Index Fund ETF Shares (VTV) has the most exposure to the Financial Services sector at 22.81%. This is followed by Healthcare and Industrials at 19.84% and 12.61% respectively. Real Estate (3.01%), Consumer Cyclical (3.79%), and Utilities (5.37%) only make up 12.17% of the fund’s total assets.

VTV’s mid-section with moderate exposure is comprised of Communication Services, Energy, Technology, Consumer Defensive, and Industrials stocks at 5.49%, 5.59%, 7.86%, 10.72%, and 12.61%.

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%.

VTV is 22.81% more exposed to the Financial Services sector than VNQ (22.81% vs 0.0%). VTV’s exposure to Healthcare and Industrials stocks is 19.84% higher and 12.61% higher respectively (19.84% vs. 0.0% and 12.61% vs. 0.0%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 87.83% less of the fund’s holdings compared to VNQ (12.17% vs. 100.00%).

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

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%.

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Risk Analysis

VTV VNQ
Mean Return 1.05 0.89
R-squared 92.61 44.4
Std. Deviation 13.78 16.13
Alpha -1.92 2.47
Beta 0.98 0.76
Sharpe Ratio 0.87 0.62
Treynor Ratio 11.94 11.9

The Vanguard Value Index Fund ETF Shares (VTV) has a Beta of 0.98 with a R-squared of 92.61 and a Standard Deviation of 13.78. Its Sharpe Ratio is 0.87 while VTV’s Alpha is -1.92. Furthermore, the fund has a Mean Return of 1.05 and a Treynor Ratio of 11.94.

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

VTV’s Mean Return is 0.16 points higher than that of VNQ and its R-squared is 48.21 points higher. With a Standard Deviation of 13.78, VTV is slightly less volatile than VNQ. The Alpha and Beta of VTV are 4.39 points lower and 0.22 points higher than VNQ’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. VNQ - Annual Returns

Year VTV VNQ
2020 2.23% -4.72%
2019 25.85% 28.91%
2018 -5.39% -5.95%
2017 17.12% 4.95%
2016 16.88% 8.53%
2015 -0.89% 2.37%
2014 13.19% 30.29%
2013 33.03% 2.42%
2012 15.19% 17.67%
2011 1.16% 8.62%
2010 14.45% 28.44%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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

VTV vs. VNQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
VNQ $10,000 $29,506 11.05%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

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%.

VTV’s CAGR is 1.03 percentage points higher than that of VNQ and as a result, would have yielded $3,657 more on a $10,000 investment. Thus, VTV outperformed VNQ by 1.03% annually.


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