Top REIT ETFs Right Now

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Contributor, Benzinga
June 11, 2024

Investing in Real Estate Investment Trust (REIT) Exchange-Traded Funds (ETFs) can be a profitable way to gain exposure to the real estate sector without the need to directly purchase and manage physical properties. REIT ETFs offer investors the opportunity to invest in a diversified portfolio of real estate assets, such as residential, commercial, and industrial properties, as well as infrastructure projects.

One of the key advantages of investing in REIT ETFs is the liquidity they offer compared to owning individual real estate properties. REIT ETFs are listed on stock exchanges, making them easy to buy and sell, providing investors with flexibility and access to their investment funds. However, like any investment, it is important for investors to conduct thorough research, and consider their investment goals, risk tolerance, and time horizon before allocating funds to REIT ETFs.

REIT ETFs Biggest Gainers and Losers

REITs, usually publicly traded companies that own or finance real estate, are valued for the income they generate. That is because REITs should pass at least 90% of their taxable income annually as dividends to shareholders.

REITs can be poor investments when the interest rates increase. That said, short-term underperformance isn’t a sufficient reason to quit your investment. Benzinga Pro and other financial news sites provide daily insight into the biggest gainers and losers among ETFs. Use these lists to find a promising REIT ETF or track its trading activity.

Stock Movers

Session: Jul 18, 2024 4:00PM EDT - Jul 19, 2024 3:59PM EDT

Premarket REIT ETFs

Premarket trading sessions let you react to new information about your ETF before the market opens at 9:30 a.m. EST. Beware that this poses certain risks, including lower liquidity and limited access to other markets and market information. Fluctuations in price are also a problem, so you may not sell or buy your ETF at your desired price. However, you may observe premarket trading to assess the intensity and direction of the market before regular trading hours.

Stock Movers

Gainers

TickerCompany±%Buy Stock
SCHHSchwab U.S. REIT ETF$21.310.7%3.1MBuy/Sell
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Loser

TickerCompany±%Buy Stock
KBWYInvesco KBW Premium Yield Equity REIT ETF$19.45-0.97%75.5KBuy/Sell
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Session: Jul 18, 2024 4:00PM EDT - Jul 19, 2024 9:29AM EDT

Aftermarket REIT ETFs

Trading after the market closes lets you react and move quickly on significant news events. But you could still be vulnerable if you act on unreliable information. Also, the volumes traded are lower, which exposes you to the risk of price uncertainty and volatility. You can also monitor aftermarket trading sessions to put a figure on investor attitude toward an ETF.

Stock Movers

Gainers

TickerCompany±%Buy Stock
No Results
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Loser

TickerCompany±%Buy Stock
No Results
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Session: Jul 19, 2024 4:00PM EDT - Jul 19, 2024 7:59PM EDT

Why Invest in REIT ETFs?

Here are 3 solid reasons to invest in REIT ETFs:

  • Diversification at a Lower Cost: Instead of investing your money separately into different REITs, you can simply buy an ETF that does this for you. You will save on transaction costs and benefit from diversification.
  • Accessible to Smaller-Scale Investors: Investing directly in property may require a huge upfront investment with further financing needed to support it. REIT ETFs let investors of all sizes board the real estate investing bandwagon.
  • Tax Advantages: If you remember, REITs provide huge tax benefits to investors since 90% of the income generated is paid as dividends. You’ll still experience these benefits if you hold REITs through an ETF.

Points to Consider When Investing in REIT ETFs

When considering investing in REIT ETFs, there are several key points to keep in mind.

  • Underlying Assets: Different REIT ETFs can focus on various types of real estate, such as residential, commercial, industrial, or healthcare properties. Investors should consider their risk tolerance and investment goals to choose an ETF that aligns with their objectives.
  • Expense Ratio and Fees: Lower expenses can significantly impact the overall returns, so it is essential to compare expense ratios among different funds.
  • Liquidity: Highly liquid REIT ETFs can be easily bought and sold, providing flexibility to investors.

3 Top REIT ETFs by AUM

REIT ETFs — securitized portfolios of real estate property — let you invest in an otherwise high-cost area. They combine the income potential of real estate with the liquidity of traditional stocks. A REIT ETF secures more investment in properties by increasing its assets under management (AUM) — an accurate standard to compare ETFs — to attract new investors. Using this indicator, here are the best REIT ETFs to invest in.

1. Vanguard Real Estate ETF (VNQ)

Vanguard Group is among the largest equity and fixed-income managers around. The Vanguard Real Estate ETF provides a high level of income as well as continuous capital appreciation by investing in stocks issued by commercial REITs. It follows the MSCI U.S. Real Estate 25/50 Index and currently has 184 holdings, 10 of which make up 42.80% of the total net assets. Its top holdings include Vanguard Real Estate II Index Fund, Prologis Inc. (NYSE: PLD) and American Tower Corp (NYSE: AMT). This ETF owns $66.6 billion in total net assets and has an expense ratio (ER) of 0.12%.

The fund boasts equity sector diversification through retail REITs, office REITs, real estate services, real estate operating companies and residential REITs among others.

2. Schwab U.S. REIT ETF (SCHH)

Schwab is both a fund provider and a popular brokerage. The fund tracks as closely as possible — before fees and expenses — the total returns of the Dow Jones U.S. Select REIT Index. The ETF has an ER of 0.07% and has 98 holdings worth $5.1 billion — all based in the U.S. This helps you avoid the risk of foreign real estate and is great if you want exclusive U.S. real estate coverage. The asset allocation for this ETF is as follows: Stocks of 99.41%, cash investments of 0.13% and other assets of 0.45%.

SCHH top holdings include Prologis Inc. (NYSE: PLD), Public Storage (NYSE: PSA) and Digital Realty Trust Inc (NYSE: DLR). You will notice some overlap with the Vanguard ETF, but they contain different assets since they follow different indices. The fund has a 5-year annualized return of -1.50%.

3. iShares Global REIT ETF (REET)

Take your real estate investment dollars across the globe with the iShares Global REIT ETF, which tracks the investment proceeds of an index comprising worldwide real estate equities in emerging and developed markets. REET has 308 holdings that add up to a decent AUM of $1.9 billion. Its ER is 0.14%.

The fund is invested 67.29% in the U.S., 8.5% in Japan, 5.26% in the United Kingdom, 3.43% in Australia and 3.04% in Canada. Other exposure markets like Singapore, France, Belgium and Hong Kong make up 8.84% of the market value. Cash & derivatives and “Others” account for 3.63%. Most of these countries are strong, more developed economies with stable real estate markets.

Prologis Inc. (NYSE: PLD), Equity Residential (NYSE: EQR) and Welltower Inc. (NYSE: WELL) are among the top 10 fund holdings. REET has enough liquidity to trade shares approximately 921,722 times per day.

Best Online Brokers for REIT ETFs

The AUM comparison standard is just the tip of the iceberg for REIT ETF investing. You also need a stellar platform, versatile trading and tracking tools, as well as an abundance of educational material, all available through an online broker.

Here are the best online brokers for REIT ETFs.

Add Real Estate Exposure to Your Portfolio

REITs provide the income and growth potential offered by real estate while eliminating the hassle of investing in and owning individual chunks of property. Similar to stocks, it may be difficult to consistently make fruitful choices when investing with individual REITs.

You might be best served by a mutual fund or ETF that tracks a wide REIT index, like the MSCI U.S. REIT Index. REIT ETFs help capture a degree of long-term growth potential, income and diversification that would be difficult to replicate with other asset classes — without taking on undue risk.

Q

Is a REIT ETF worth it?

A
Investing in a REIT ETF can be worth it for several reasons. Firstly, REITs typically provide regular income through dividends, making them attractive for income-seeking investors. Another benefit of REIT ETFs is their potential for capital appreciation. Additionally, REIT ETFs provide liquidity, allowing investors to buy and sell shares on the stock exchange easily.
Q

What are the largest REIT ETFs?

A
Vanguard Real Estate ETF (VNQ), iShares U.S. Real Estate ETF (IYR), and Schwab U.S. REIT ETF (SCHH) are some of the largest and most well-known REIT ETFs, offering investors exposure to a diverse portfolio of real estate investment trusts across various sectors such as retail, residential, and office properties.
Q

Do REIT ETFs pay dividends?

A

Yes, REIT ETFs typically pay dividends to their investors. REITs are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends. This requirement is what makes REITs an attractive investment option for income-seeking investors.

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