FREL vs VNQ: Which ETF Is Better in 2026?
A metric-by-metric comparison of Fidelity MSCI Real Estate Index ETF (FREL) and Vanguard Real Estate Index Fund ETF Shares (VNQ) — both Real Estate funds — using ETFValuer's daily-updated rankings.
Educational content — not financial advice. Data as of July 25, 2026. ~5 minute read.
The Verdict
FREL and VNQ are close to the same fund wearing different labels. Both sit in the Real Estate category and their daily returns move almost identically, so this is not really a question of which fund is better — it is a question of which one is cheaper to own and easier to trade in your account. Everything below is about finding the small, structural edges, because the investment exposure is a wash.
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — VNQ scores higher: 63.6 (Grade C) versus 57.1 for FREL. That doesn't make FREL a bad fund; it means VNQ currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Head-to-Head: Every Metric
| FREL | VNQ | |
|---|---|---|
| Category | Real Estate | Real Estate |
| Expense ratio | 0.08% | 0.13% |
| Fund size (AUM) | $1.5B | $71.3B |
| Dividend yield | 3.29% | 3.38% |
| 1-year return | +13.30% | +13.77% |
| 3-year return | +32.88% | +33.16% |
| Volatility | 14.08% | 14.05% |
| Max drawdown | -17.54% | -17.45% |
| Sharpe ratio | 0.59 | 0.62 |
| ETFValuer score | 57.1 | 63.6 |
| Grade | C | C |
| Overall rank | #299 | #187 |
Bold marks the better value in each row. "Better" is directional only (e.g. lower cost, higher return) — it isn't a recommendation by itself. See the full methodology.
Cost
FREL is the cheaper fund, charging 0.08% a year versus 0.13% for VNQ — a gap of 0.05 percentage points (about $4.60/year on a $10,000 position) that compounds meaningfully over a multi-decade holding period. Since these two deliver almost the same exposure, that fee gap is close to the entire difference between them — it comes straight out of your return with nothing offered in exchange. See the ETF Fee Calculator for the exact dollar impact at your investment size and horizon.
What VNQ's Fees Cost You
VNQ charges an expense ratio of 0.13% a year, deducted automatically from the fund's value. Small percentages compound into real money — adjust the figures below to see the impact on your own numbers.
Assumes a constant gross return and no additional contributions — a simplification, but it isolates exactly what the expense ratio costs. Try the full fee calculator to model contributions and compare any two funds.
Performance & Risk
Over the trailing 3 years, VNQ returned +33.16% versus +32.88% for FREL — a gap of about 0.3 percentage points. On risk, VNQ has held up better historically, with a shallower max drawdown (-17.45% vs. -17.54%). VNQ currently has the better risk-adjusted return (Sharpe ratio of 0.62 vs. 0.59), meaning it delivered more return per unit of volatility taken on. Read that gap sceptically: for funds tracking near-identical exposure, a 0.3-point difference over three years is mostly noise from fee drag and timing, not evidence that one manager is better than the other.
How Closely Do They Track Each Other?
Over the last 3.0 years of daily returns (752 shared trading days), FREL and VNQ show a near-perfect correlation of 0.998 — functionally interchangeable. At this level the two funds are, for practical purposes, the same investment. Owning both adds no diversification whatsoever — the decision should come down entirely to cost, spread and which one your broker handles better.
| Measure | Value | What it means |
|---|---|---|
| Daily return correlation | 0.998 | Near-perfect — functionally interchangeable |
| R-squared | 99.6% | 99.6% of FREL's daily moves are explained by VNQ's |
| Tracking error (annualised) | 1.11% | Typical yearly spread between the two funds' returns |
| Annualised return over 3.0y | FREL +9.51% · VNQ +9.62% | VNQ ahead by 0.11 points a year |
Correlation alone understates how far these can drift. Across every rolling 12-month window in the period, FREL finished as much as +0.5 points ahead of VNQ at the best extreme and -0.6 points at the worst — a 1.1-point spread between the best and worst year of relative performance. Two funds can correlate tightly day to day and still deliver very different outcomes over any single year you happen to hold them.
Calculated from daily total returns over the trailing 3-year window, recomputed every day this site refreshes. Correlation of 1.00 means the two funds moved in lockstep; 0.00 means their daily moves were unrelated.
Holdings Overlap
FREL and VNQ hold 9 of the same companies among their top 10 positions. Those shared names make up 44.9% of FREL and 40.1% of VNQ. That's heavy duplication — owning both largely doubles down on the same companies rather than spreading risk. Most investors should pick one.
| Shared Holding | FREL Weight | VNQ Weight |
|---|---|---|
| Welltower Inc | 8.60% | 7.84% |
| Prologis Inc | 8.19% | 7.00% |
| Equinix Inc | 4.72% | 5.64% |
| American Tower Corp | 5.29% | 4.54% |
| Digital Realty Trust Inc | 4.32% | 3.66% |
| Simon Property Group Inc | 4.28% | 3.53% |
| Realty Income Corp | 3.70% | 3.11% |
| Public Storage | 3.09% | 2.54% |
| CBRE Group Inc | 2.75% | 2.25% |
Compares the top 10 reported holdings from each fund's most recent SEC N-PORT-P filing, so it understates total overlap — funds tracking similar indexes overlap far more deeply than the top 10 alone can show. Search any company across all tracked funds with the Stock Overlap tool.
Which One Should You Pick?
Lean FREL if…
- You want the lower running cost — 0.08% vs 0.13%, about $5 a year less on a $10,000 position
Lean VNQ if…
- You want the deeper, more liquid market ($71B in assets vs $1B) and the tighter spread (0.010% vs 5.163%)
Whichever you pick, holding both at full weight is usually the wrong answer — see the overlap and correlation sections above.
Frequently Asked Questions
Is FREL or VNQ better?
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — VNQ scores higher: 63.6 (Grade C) versus 57.1 for FREL. That doesn't make FREL a bad fund; it means VNQ currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Which has the lower expense ratio, FREL or VNQ?
FREL currently has the lower expense ratio (0.08% vs. 0.13%).
Can I hold both FREL and VNQ?
You can, but there's little point. FREL and VNQ have a daily return correlation of 1.00 over the past 3.0 years, meaning they move almost in lockstep. Holding both roughly doubles a single bet rather than spreading it — pick whichever wins on cost and liquidity and put the money in one place.
Go deeper on either fund
Full daily-updated metrics, holdings context, and category peers.