Top ETFs and What They Track: REIT ETFs

Real estate investment trusts (REITs) are securities traded on stock exchanges that invest directly in real estate, both through properties and mortgages. REITs provide an easy, liquid and low-cost way to access the real estate market. REITs offer diversification in that, historically, they have had a low correlation to the stock market.

REITs receive special tax considerations and typically offer investors higher yields than stocks. While REITs are more volatile than bonds, they offer a greater potential appreciation. (See also: 5 Types of REITs and How to Invest in Them.)

Vanguard REIT ETF – VNQ

The Vanguard REIT ETF (VNQ) is the largest fund in the sector VNQ holds a broad portfolio of U.S.-focused REITs, and offers broad, diversified exposure and a reasonable expenses ratio. While income is the fund’s primary goal, investors may also see appreciation in the overall value.

VNQ tracks the MSCI US REIT Index, which measures the performance of REITs. The specific stocks in the fund are part of the Index, and they’re weighted similarly to the Index’s holdings. The price value of VNQ rises and falls based on the movements of the index which covers about two-thirds of the value of the entire U.S. REIT market. 

Introduced in 2004, VNQ has $29.57 billion in total assets, an average daily volume of 4.3 million shares and an expense ratio of 0.12%.

iShares U.S. Real Estate ETF – IYR

As the name indicates, iShares U.S. Real Estate ETF (IYR) is another domestic REIT. The fund invests primarily in REITs and real estate stocks and tries to keep 90% of its assets in securities found in the Dow Jones U.S. Real Estate Index – the fund’s benchmark. 

Launched in 2000, VNQ has $3.53 billion in total assets, an average daily volume of 6.9 million shares and an expense ratio of 0.44%.

Schwab U.S. REIT ETF – SCHH

Schwab U.S. REIT ETF (SCHH) invests in REITs from the Dow Jones U.S. Select REIT Index (its benchmark) and in other REITs that aren’t included in the Index. For the REITs that are part of the Index, the fund assigns similar weightings to those used in the Index. The fund provides broad exposure to a wide variety of REITs, including retail, residential, office, health care, hotel & resort, industrial and specialized REITs.

Introduced in 2011, SCHH has $3.76 billion in total assets, an average daily volume of about 600,000 shares and a low expense ratio of 0.07%. (See also: The Best Real Estate REIT ETFs of 2018.)