VNQ vs XLF: Head-to-Head Comparison
VNQ vs XLF: Vanguard Real Estate ETF has an expense ratio of 0.12% while Financial Select Sector SPDR Fund charges 0.09%. VNQ holds 160 securities vs XLF's 73. 5-year returns: 4.80% vs 12.80%.
Last updated: April 2026
Real Estate vs Financials
Quick Verdict
VNQ edges out XLF with a stronger Beginner Suitability Score (8.5 vs 8). It offers better overall characteristics for new investors.
Side-by-Side Comparison
| Metric | VNQ | XLF |
|---|---|---|
| Expense Ratio | 0.12% | 0.09% |
| AUM | $34.0B | $45.0B |
| Dividend Yield | 3.90% | 1.60% |
| Holdings | 160 | 73 |
| 1-Year Return | 11.20% | 28.50% |
| 5-Year Return (Ann.) | 4.80% | 12.80% |
| 10-Year Return (Ann.) | 6.50% | 11.20% |
| Beta | 1.05 | 1.08 |
| P/E Ratio | 35.2 | 17.2 |
VNQ 5-year annualized return is 4.80% compared to XLF's 12.80%. Over 10 years, VNQ returned 6.50% vs XLF's 11.20%.
View data table
| Period | VNQ Return | XLF Return |
|---|---|---|
| YTD | 0.80% | 3.50% |
| 1 Year | 11.20% | 28.50% |
| 3 Year | 2.10% | 10.50% |
| 5 Year | 4.80% | 12.80% |
| 10 Year | 6.50% | 11.20% |
Key Differences Between VNQ and XLF
VNQ (Vanguard Real Estate ETF) is a real estate fund managed by Vanguard. VNQ provides exposure to the U.S. real estate market through Real Estate Investment Trusts (REITs) without the hassle of buying physical property. REITs are required by law to distribute at least 90% of their taxable income as dividends, which gives VNQ a higher yield than most equity ETFs. Beginners interested in real estate investing can use VNQ to add property exposure to their portfolio at a fraction of the cost of buying a building.
XLF (Financial Select Sector SPDR Fund) is a financial sector fund managed by State Street Global Advisors. XLF tracks the financial sector of the S&P 500, including banks, insurance companies, asset managers, and financial services firms. The financial sector is a major pillar of the U.S. economy and tends to benefit from rising interest rates and economic growth. Beginners should know that XLF provides targeted exposure to one sector, which makes it more volatile than a diversified fund but useful for investors with specific views on the financial industry.
The most notable differences are in fees (0.12% vs 0.09%), number of holdings (160 vs 73), and 5-year returns (4.80% vs 12.80%).
VNQ vs XLF multi-factor comparison: VNQ has a 0.12% expense ratio, 4.80% 5-year return, 160 holdings, 1.05 beta, and 3.90% yield. XLF has 0.09% expense ratio, 12.80% 5-year return, 73 holdings, 1.08 beta, and 1.60% yield.
View data table
| Metric | VNQ | XLF |
|---|---|---|
| Expense Ratio | 0.12% | 0.09% |
| 5-Year Return | 4.80% | 12.80% |
| Holdings | 160 | 73 |
| Beta | 1.05 | 1.08 |
| Dividend Yield | 3.90% | 1.60% |
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Holdings Overlap Analysis
0%
Holdings Overlap
VNQ and XLF share only 0% of their top holdings. These funds are quite different, making them complementary choices if you want broader market coverage.
VNQ and XLF share 0% of their top holdings (low overlap). VNQ has 160 total holdings and XLF has 73.
View data table
| Metric | VNQ | XLF |
|---|---|---|
| Overlap | 0% | 0% |
| Unique Holdings | 100% | 100% |
| Total Holdings | 160 | 73 |
Cost Comparison Over Time
If you invest $10,000 and hold for 20 years (assuming 8% annual returns):
VNQ
Fee cost: $1,025
XLF
Fee cost: $771
Over 20 years, the fee difference amounts to $254 on a $10,000 investment. XLF saves you more in fees over time.
On a $10,000 investment over 20 years at 8% return, VNQ (0.12% fee) grows to $45,585 while XLF (0.09% fee) grows to $45,839. The fee difference costs $254.
View data table
| Year | VNQ Value | XLF Value |
|---|---|---|
| 0 | $10,000 | $10,000 |
| 5 | $14,612 | $14,632 |
| 10 | $21,351 | $21,410 |
| 15 | $31,197 | $31,327 |
| 20 | $45,585 | $45,839 |
Which One Should a Beginner Choose?
Choose VNQ if: You want income-seeking investors who want real estate exposure without being a landlord, investors looking to diversify beyond stocks and bonds, those who want inflation protection through real asset ownership. It's managed by Vanguard with an expense ratio of 0.12%.
Choose XLF if: You want investors who want to overweight the financial sector in their portfolio, those who believe rising interest rates will benefit banks and financial companies, value-oriented investors attracted to the sector's lower price-to-earnings ratio. It's managed by State Street Global Advisors with an expense ratio of 0.09%.
Can You Own Both VNQ and XLF?
Absolutely! With only 0% overlap, VNQ and XLF complement each other well. A simple portfolio might allocate 60% to one and 40% to the other, or you could pair them with a bond ETF like BND for a complete three-fund portfolio.
Frequently Asked Questions
Should I buy VNQ or XLF?▾
VNQ edges out XLF with a stronger Beginner Suitability Score (8.5 vs 8). It offers better overall characteristics for new investors. However, both are solid options. VNQ is best for investors who want income-seeking investors who want real estate exposure without being a landlord, while XLF is better suited for investors who want to overweight the financial sector in their portfolio.
What is the difference between VNQ and XLF?▾
VNQ (Vanguard Real Estate ETF) tracks real estate investments with 160 holdings and a 0.12% expense ratio. XLF (Financial Select Sector SPDR Fund) focuses on financial sector with 73 holdings at 0.09%. Their top holdings overlap by 0%.
Can I own both VNQ and XLF?▾
Yes! With only 0% holdings overlap, VNQ and XLF complement each other well. Owning both gives you broader diversification.