The choice between Vanguard Real Estate ETF (NYSEARCA:VNQ) and Schwab U.S. REIT ETF (NYSEARCA:SCHH) looks like a wash on the surface. Both promise diversified U.S. real estate exposure at rock-bottom fees. But the two indexes underneath them screen REITs differently, and that construction gap has driven meaningfully different yields, sector mixes, and returns as the 10-year Treasury yield sits at 4.49% and pressures the whole sector.
What each fund is actually betting on
VNQ tracks an MSCI-based U.S. real estate index that reaches beyond pure landlord REITs. Roughly 14.5% of the fund sits in the Vanguard Real Estate II Index Fund, a wrapper that holds specialized REITs, mortgage REITs, and real estate management and development companies. That means VNQ is quietly betting that the broader real estate ecosystem, including operators and financiers, delivers returns comparable to owning buildings.
SCHH tracks the Dow Jones U.S. Select REIT Index, which screens out mortgage REITs, hybrid REITs, and non-REIT real estate firms. It is a purer bet on equity REITs that own physical property and collect rent. When rate cycles hammer mortgage REITs, as they did in 2022, SCHH’s cleaner sleeve tends to sidestep the worst of it. When credit spreads tighten and specialized names rally, VNQ picks up return SCHH cannot.
Where the difference shows up
Over the past year, SCHH returned 15.24% against VNQ’s 12.22%. Year to date the spread is similar: 15.69% for SCHH versus 12.05% for VNQ. Zoom out ten years, though, and the ranking flips. VNQ delivered 60.81% against SCHH’s 43.98%, a testament to how the broader basket compounded through multiple cycles.
The dividend story cuts the other direction. VNQ paid $3.4718 per share across 2025, a trailing yield near 3.57% on the current $97.24 price. SCHH distributed $0.635 in 2025, roughly 2.66% at $23.87. Mortgage REIT and specialized income lifts VNQ’s payout, but those same holdings make the distribution more volatile: SCHH’s 2026 quarterly payments have been notably lower than 2025’s, and VNQ’s Q2 2026 payout of $0.8554 stayed within its normal band.
The practical comparison
| Metric | VNQ | SCHH |
|---|---|---|
| Expense ratio | 0.13% | 0.07% |
| Assets under management | $69.8B | $11.3B |
| Index | MSCI US IMI Real Estate 25/50 | Dow Jones U.S. Select REIT |
| Trailing 12M yield | ~3.57% | ~2.66% |
| 1-year total return | 12.22% | 15.24% |
| 10-year total return | 60.81% | 43.98% |
SCHH is cheaper and more liquid per dollar invested, but VNQ’s scale means both trade tightly. The bigger practical divide is behavior: housing starts fell 15.4% in May 2026 to 1.18M annualized units, a signal the property cycle is softening. In that environment, SCHH’s pure equity REIT sleeve tends to hold up better than VNQ’s mortgage-REIT-inclusive basket.
The verdict
SCHH fits the investor who wants a clean, cheap bet on U.S. equity REITs and is willing to accept a lower current yield for lower complexity and stronger recent performance. VNQ fits the income-focused investor who wants the highest sustainable payout REIT ETFs offer and is comfortable with mortgage and specialized exposure that widens the fund’s return distribution. If the Fed cuts rates and credit spreads compress, VNQ’s broader basket should close the performance gap. Until then, SCHH’s purer construction is doing the heavier lifting.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks