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VXUS vs. VNQ: What’s The Difference?

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

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

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

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Summary

VXUSVNQ
NameVanguard Total International Stock Index Fund ETF SharesVanguard Real Estate Index Fund ETF Shares
CategoryForeign Large BlendReal Estate
IssuerVanguardVanguard
AUM404.73B77.34B
Avg. Return8.41%11.05%
Div. Yield2.44%2.34%
Expense Ratio0.08%0.12%

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.

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%.

VXUS’s dividend yield is 0.10% higher than that of VNQ (2.44% vs. 2.34%). Also, VXUS yielded on average 2.64% less per year over the past decade (8.41% vs. 11.05%). The expense ratio of VXUS is 0.04 percentage points lower than VNQ’s (0.08% vs. 0.12%).

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Fund Composition

Industry Exposure

VXUS vs. VNQ - Industry Exposure

VXUSVNQ
Technology13.07%0.0%
Industrials12.94%0.0%
Energy4.55%0.0%
Communication Services7.06%0.0%
Utilities2.94%0.0%
Healthcare9.19%0.0%
Consumer Defensive7.83%0.0%
Real Estate3.79%100.0%
Financial Services17.64%0.0%
Consumer Cyclical12.64%0.0%
Basic Materials8.37%0.0%

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has the most exposure to the Financial Services sector at 17.64%. This is followed by Technology and Industrials at 13.07% and 12.94% respectively. Real Estate (3.79%), Energy (4.55%), and Communication Services (7.06%) only make up 15.40% of the fund’s total assets.

VXUS’s mid-section with moderate exposure is comprised of Consumer Defensive, Basic Materials, Healthcare, Consumer Cyclical, and Industrials stocks at 7.83%, 8.37%, 9.19%, 12.64%, and 12.94%.

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%.

VXUS is 17.64% more exposed to the Financial Services sector than VNQ (17.64% vs 0.0%). VXUS’s exposure to Technology and Industrials stocks is 13.07% higher and 12.94% higher respectively (13.07% vs. 0.0% and 12.94% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 84.60% less of the fund’s holdings compared to VNQ (15.40% vs. 100.00%).

Holdings

VXUS - Holdings

VXUS HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd1.62%
Tencent Holdings Ltd1.41%
Alibaba Group Holding Ltd Ordinary Shares1.26%
Nestle SA1.1%
Samsung Electronics Co Ltd1.05%
ASML Holding NV0.86%
Roche Holding AG0.81%
Toyota Motor Corp0.67%
LVMH Moet Hennessy Louis Vuitton SE0.61%
Novartis AG0.6%

VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.

ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.

VNQ - Holdings

VNQ HoldingsWeight
Vanguard Real Estate II Index11.62%
American Tower Corp7.24%
Prologis Inc5.33%
Crown Castle International Corp5.01%
Equinix Inc4.3%
Public Storage2.85%
Simon Property Group Inc2.52%
Digital Realty Trust Inc2.49%
SBA Communications Corp2.1%
Welltower Inc2.09%

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

VXUSVNQ
Mean Return0.560.89
R-squared98.3944.4
Std. Deviation15.1216.13
Alpha0.312.47
Beta0.990.76
Sharpe Ratio0.40.62
Treynor Ratio5.1411.9

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has a Standard Deviation of 15.12 with a Alpha of 0.31 and a Treynor Ratio of 5.14. Its Beta is 0.99 while VXUS’s Mean Return is 0.56. Furthermore, the fund has a R-squared of 98.39 and a Sharpe Ratio of 0.4.

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

VXUS’s Mean Return is 0.33 points lower than that of VNQ and its R-squared is 53.99 points higher. With a Standard Deviation of 15.12, VXUS is slightly less volatile than VNQ. The Alpha and Beta of VXUS are 2.16 points lower and 0.23 points higher than VNQ’s Alpha and Beta.

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Performance

Annual Returns

VXUS vs. VNQ - Annual Returns

YearVXUSVNQ
202011.32%-4.72%
201921.58%28.91%
2018-14.42%-5.95%
201727.52%4.95%
20164.72%8.53%
2015-4.28%2.37%
2014-4.17%30.29%
201315.16%2.42%
201218.22%17.67%
20110.0%8.62%
20100.0%28.44%

VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% 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

VXUS vs. VNQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VXUS$10,000$19,3158.41%
VNQ$10,000$21,15011.05%

A $10,000 investment in VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.

With a $10,000 investment in VNQ, the end total would have been $21,150. This equates to a $11,150 profit over 9 years and a compound annual growth rate (CAGR) of 11.05%.

VXUS’s CAGR is 2.64 percentage points lower than that of VNQ and as a result, would have yielded $1,835 less on a $10,000 investment. Thus, VXUS performed worse than VNQ by 2.64% annually.


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