Best ETF REITs: Best Real Estate Funds for Investors



By owning a REIT, investors receive a portion of the profits without buying, managing or financing physical property. Moreover, market participants have historically preferred real estate for its diversification characteristics, since these investments have a low correlation with stocks or bonds.

REIT investors carefully consider dividend yields as dividends are the primary motivation for investing in these assets. Dividend yield is expressed as a percentage and is calculated by dividing the annual dividend payment by the share price.

In general, the type of assets held by the REIT ETF will determine the fund’s risk profile and dividend payout.

Before investing in a REIT ETF, consider checking Avenue to understand his investment strategy and his holdings.


Below are some of the most popular REIT ETFs on the market. (Data as of June 15, 2021)

ETF Vanguard Real Estate (VNQ)

VNQ is the most popular ETF REIT. The fund tracks an index of companies involved in the ownership and operation of real estate properties in the United States.

Fund Issuer: Avangard

5-year annualized rate of return: 8.6%

Dividend Yield: 3.21 percent.

Expense ratio: 0.12 percent

Assets Under Management: ~ $ 42 billion

iShares US Real Estate ETF (IYR)

The IYR is one of the oldest REIT ETFs in existence. Like VNQ, the fund tracks an index of US companies that are directly or indirectly involved in the real estate industry.

Fund Issuer: BlackRock

5-year annualized rate of return: 9%

Dividend Yield: 2.49 percent

Expense ratio: 0.42 percent

Assets Under Management: ~ $ 7 billion

Select Sector SPDR Real Estate Fund (XLRE)

XLRE is one of the major sectors in the S&P 500. The fund invests in large-cap real estate companies operating in the United States.

Fund Issuer: State Street Global Advisors

Five-year annualized rate of return: 11 percent

Dividend Yield: 3.39%

Expense ratio: 0.12 percent

Assets Under Management: ~ $ 3 billion

iShares Global REIT ETF (REET)

REET tracks the global index of real estate companies operating in emerging and developed markets including the US.

Fund Issuer: BlackRock

5-year annualized rate of return: 6%

Dividend Yield: 2.28 percent.

Expense ratio: 0.14 percent

Assets Under Management: ~ $ 3 billion

JPMorgan BetaBuilders MSCI US REIT ETF (BBRE)

BBRE tracks an index of small, medium and large-cap companies, primarily in commercial and specialty real estate in the United States.

Fund Issuer: JPM

5-year annualized return: NA (launched in 2018)

Dividend Yield: 3.95%.

Expense ratio: 0.11 percent

Assets under management: ~ $ 1.5 billion

What is a REIT?

REITs invest in various real estate properties such as residential apartments, office buildings, hospitals, data centers, hotels, retail stores, and so on. Companies supporting this activity, such as financial lenders and asset management companies, are also part of the group.

Some REITs specialize in specific market areas such as mortgage finance, while others diversify investments in the real estate market. The risk profile of a REIT depends on the assets it owns.

To be eligible for REIT status, a company must follow certain requirements… One of these provisions is that a company must distribute to shareholders at least 90 percent of its taxable income in the form of dividends.

Most REITs fall into three categories: equity, mortgage, and hybrid.

Advantages and Disadvantages of Investing in an ETF REIT

ETF REITs Provide Reliable Flow passive income for investors receiving dividends without having to own or manage real estate. In addition, these funds are highly liquid, so you can get your principal back at any time, which is not easy with physical real estate. In addition, REITs serve as a diversification tool for your portfolio as they are less correlated with other asset classes such as stocks.

On the other hand, REITs tend to be more volatile and prone to quick losses, which is less noticeable in physical real estate. In addition, because REITs must return 90 percent of the income to investors, they have less funds to pursue other investment opportunities. In addition, dividends from REITs are often taxed as ordinary income.

Despite these shortcomings, Nareith’s exploration, a REIT organization, shows that total REIT earnings over the past 20 years have surpassed the Russell 1,000 index for large-cap companies by 2 percent (10.7 percent versus 8.7 percent).

How to invest in ETF REIT

Reliable dividend strategy is an essential component of every investor’s portfolio. And when dividends are reinvested, profits can be even higher.

There are four steps to consider when choosing an ETF REIT:

1. Define your financial goals.

The type of investment you choose depends on what you are trying to achieve. For example, someone who is about to retire should be more conservative in investing. Therefore, always let financial goals guide your decisions.

2. Explore REIT funds

When choosing a REIT ETF, consider factors such as dividend history, dividend yield, fund performance, expense ratios, underlying holdings and assets under management. Investors can find this information in the fund’s prospectus.

3. Identify your set of assets.

Before investing, take an inventory of what you own and how you want to allocate your assets. Remember the key to stay diversified

4. Know what you have

By checking your investments periodically, you can monitor your finances and make any necessary adjustments. Use any of your broker’s free resources, such as meeting with a financial planner, and always ask questions. After all, there is no such thing as laissez-faire in investment.

Like any investment, REIT ETFs are prone to losses. However, the magnitude of the potential losses depends on the level of risk contained in the portfolio. Thus, a fund that invests heavily in potentially riskier assets, such as highly leveraged real estate companies, will have a very different risk profile than a fund investing in established, time-tested names.

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Editorial Disclaimer: All investors are encouraged to conduct their own independent research on investment strategies before making an investment decision. In addition, investors are advised that the performance of past investment products does not guarantee future price increases.


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