Understanding the Vanguard Global Ex-U.S. Real Estate Index Fund ETF (VNQI)

What this ETF is trying to do

The VNQI is an Exchange Traded Fund (ETF) that focuses on real estate. It is designed to track a global index of real estate assets located outside of the United States.

What the numbers show

When looking at an ETF, it is important to know the difference between "price return" and "total return."

• Price Return: This only tracks how much the share price itself has changed.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out to investors.

For VNQI, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -5.52%. The total return is also approximately -5.52%.

• One Year: The price return was approximately -9.58%, while the total return was approximately -5.29%.

• Three Years: The price return was approximately 8.41%, and the total return was significantly higher at approximately 24.08%.

To visualize the price change over the last year, we can look at an estimated price from roughly one year ago, which was $47.90. The current price is $43.31.

Income and distribution explanation

Some investors look for ETFs that pay out cash, known as distributions. VNQI has a distribution yield of approximately 4.98%. This means the cash paid out is about 4.98% of the current share price. The trailing distributions are approximately $2.16.

It is important to remember that a high distribution yield does not mean the investor earned that percentage as their total return. You must always look at the "total return" figure to see how the investment performed overall.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price does not always mean the NAV is eroding, we use an "erosion-risk score" to measure this risk.

VNQI has an erosion score of 75, which is labeled as "mild price erosion." This is considered a mild level of risk and does not trigger a severe erosion-risk flag.

Pros

• The three-year total return has been positive at approximately 24.08%.

• The fund provides a distribution yield of approximately 4.98%.

Cons

• The one-year price return has been negative, showing a share-price decline of approximately -9.58%.

• The fund shows a "mild" erosion-risk score.

Beginner takeaway

When studying VNQI, notice that the total return is often different from the price return. This happens because distributions add value back to the investor. While the share price has declined over the last year, the total return figure provides a more complete picture of how the investment performed including its payouts.