Top 4 Best US Real Estate REIT Specialty ETF fund plus bear and leveraged

US REIT ETF logo
US REIT ETF logo

Intro

Real Estate investment is not for everyone. One maybe successful like Donald Trump, others may fail in real estate investment. There are many ways to invest in real estate whether it is directly or indirectly. Direct investment may involve buying house or investment property and indirect investment may involve in investing in trusts or fund. This article will focus especially on indirect investing in real estate especially investing in REIT exchange traded funds or (REIT ETF).

Note: REIT = Real Estate Investment Trust

Several reasons to invest in REIT ETF are:

  1. ETF is liquid and it is trading like a stock. Investor can buy or sell REIT ETF during trading hours or after / before trading hours. Compare to mutual fund, it is definitely more attractive in my opinion. There is also no yearly distribution such as short term or long term capital gain for tax. This means ETF is more tax efficient than mutual funds.
  2. It has low expense ratio or low fee. This is due to most of REIT ETFs are tracking its index passively. Compare to mutual fund, REIT ETF expense ratio is almost two to three times lower than REIT mutual fund.
  3. REIT ETF is tracking its index. Performance wise, the fund should closely track its index performance before fees. This can be advantageous for investor such as preventing any loss due to fund manager's bias opinion on certain company.
  4. It provides a decent yield or dividend either monthly or quarterly. This can provide additional income for investor during any market conditions.

Another way to invest in REIT is by investing in REIT ETF and REIT mutual funds. If you are interested in REIT mutual fund, please check my following article:


Criteria and List

What are my criteria for selecting this Top 4 Best US Real Estate REIT ETFs? I always like the big asset fund. I will also consider its Morningstar rating (> 3 stars). Since most the ETFs are new, some ETFs may not have any Morningstar rating. Big asset fund means small investor as well as institutional investor will select to invest in this fund first before other small asset ETFs. Usually big asset also means it is a solid fund and will continue to grow during present or future time. The ETFs also should provide some dividend income periodically. The following is the Top 4 Best US Real Estate REIT ETFs:

  1. Vanguard REIT Index ETF
  2. iShares Dow Jones US Real Estate
  3. iShares Cohen & Steers Realty Majors
  4. SPDR Dow Jones REIT


Top 10 US REIT ETF Fund

(click column header to sort results)
No  
Fund Name  
Ticker  
Total Asset (Bil)  
Expense Ratio  
M* rating  
Yield  
1
Vanguard REIT Index ETF
VNQ
7.1
0.13%
3
3.52%
2
iShares Dow Jones US Real Estate
IYR
2.7
0.47%
3
3.48%
3
iShares Cohen & Steers Realty Majors
ICF
2.2
0.35%
2
2.94%
4
SPDR Dow Jones REIT
RWR
1.3
0.25%
2
2.98%
5
iShares FTSE NAREIT Mort Plus Cp Idx
REM
0.09
0.48%
4
10.46%
6
First Trust S&P REIT Idx
FRI
0.07
0.50%
3
1.49%
7
iShares FTSE NAREIT Resid Plus Cp Idx
REZ
0.07
0.48%
5
3.10%
8
iShares FTSE NAREIT Real Estate 50
FTY
0.05
0.48%
3
3.62%
9
PowerShares Active U.S. Real Estate
PSR
0.02
0.80%
NR
1.61%
10
iShares FTSE NAREIT Retail Cp Idx
RTL
0.01
0.48%
1
3.10%
Note: Small fund maybe very volatile - Updated December 15,2010

Note: For fund performance, please look at the table below.


Vanguard REIT Overview
Vanguard REIT Overview

1. Vanguard REIT Index ETF

Vanguard REIT ETF (ticker: VNQ) is the biggest REIT ETF and is the lowest-priced exchange traded fund for broad exposure to publicly traded real estate investment trusts (REITs). REITs offer investors, either long term or short term, the ability to invest in a traditionally illiquid real estate asset class and receive stock-like returns with bond-like income streams. As many investors or traders know, real estate can provide as a hedge against inflation through both asset appreciation and rising rents.

The Vanguard REIT Index ETF seeks to provide a high level of income and moderate long-term capital appreciation. The fund employs a passive management or indexing investment approach designed to track the performance of the MSCI US REIT Index. The index is composed of stocks of publicly traded equity real estate investment trusts (identified as REITs). The fund will try to replicate the index by investing most of its assets in the stocks that make up the index. The total expense ratio is 0.13% per year which is low compare to most mutual funds or other competitor ETFs.

The primary portfolio consists of medium blend stocks or equities. As of December 2010, the top 5 REIT sectors of fund are Retail REITs, Specialized REITs, Residential REITs, Office REITs and Diversified REITs. Top 10 largest equity holdings for this fund include Simon Property Group Inc, Equity Residential, Public Storage, Vornado Realty Trust, Boston Properties Inc, Host Hotels & Resorts Inc, HCP Inc, AvalonBay Communities Inc, Ventas Inc and ProLogis.


2. iShares Dow Jones US Real Estate - IYR

iShares Dow Jones US Real Estate is part of iShares fund family provided by BlackRock. The ETF seeks investment results that match generally to the price and yield performance of the Dow Jones U.S. Real Estate Index. The ETF invests at most of its assets (>90%) in securities of the underlying index and in depositary receipts representing securities of the index. The underlying index measures the real estate sector of the U.S. equity market performance. The index includes companies in the following industry groups: real estate holding and development and real estate investment trusts (REITs). The total expense ratio is 0.47% per year.

The primary portfolio consists of medium blend stocks or equities. As of December 2010, the top 5 REIT sectors of fund are Industrial & Office REITs, Retail REITs, Specialty REITs, Residential REITs, and Mortgage REITs. Top 10 largest equity holdings for this fund include Simon Property Group Inc, Vornado Realty Trust, Equity Residential, Public Storage, Boston Properties Inc, Annaly Capital Management Inc, Host Hotels & Resorts Inc, HCP Inc, AvalonBay Communities Inc, and Ventas Inc.


3. iShares Cohen & Steers Realty Majors - ICF

The iShares Cohen & Steers Realty Majors Index Fund objective is to seek investment results that correspond in general to the price and yield performance of large, actively traded U.S. real estate investment trusts, as represented by the Cohen & Steers Realty Majors Index before fee. The total expense ratio of this iShares Cohen & Steers Realty Majors ETF is 0.35% per year.

The primary portfolio consists of medium blend stocks or equities. As of December 2010, the fund invests 99.79% of its asset in Real Estate Investment Trusts (REITs). The top 10 largest equity holdings for this fund include Simon Property Group Inc, Equity Residential, Public Storage, Vornado Realty Trust, Boston Properties Inc, Host Hotels & Resorts Inc, HCP Inc, AvalonBay Communities Inc, Ventas Inc and ProLogis.


REIT ETFs Overview

Click thumbnail to view full-size
IYR HoldingICF HoldingRWR Holding
IYR Holding
IYR Holding
ICF Holding
ICF Holding
RWR Holding
RWR Holding

4. SPDR Dow Jones REIT ETF

The SPDR Dow Jones REIT ETF (Ticker: RWR) seeks to provide investment results that correspond in general to the total return of the Dow Jones U.S. Select REIT index before expenses and/or fees. The fund uses a passive management strategy designed to track the total return performance of the Wilshire REIT index. The fund seeks a correlation of 0.95 or better between the fund performance and the index performance. The total expense ratio of this SPDR Dow Jones REIT ETF is 0.25% per year.

The primary portfolio consists of medium blend stocks or equities. As of December 2010, the top 5 REIT sectors of fund are Apartments, Regional Malls, Office REITs, Health Care and Strip Centers. The top 10 largest equity holdings for this fund include Simon Property Group Inc, Vornado Realty Trust, Equity Residential, Public Storage, Boston Properties Inc, Host Hotels & Resorts Inc, HCP Inc, AvalonBay Communities Inc, Ventas Inc and ProLogis.


Leveraged REIT ETFs

The following are various bear ETFs and leveraged REIT ETFs. These ETFs are only for trading and are not recommended for long term holding. The leveraged ETFs usually try to track the index twice or three times the REIT index price movement during the day. It usually will reset the price by end of the day.

a. Leveraged Bear REIT ETF

  • ProShares UltraShort Real Estate - SRS
  • Direxion Real Estate Bear 3X - Triple-Leveraged ETF - DRV

b. Leveraged Bull REIT ETF

  • Direxion Daily Real Estate Bull 3X Shrs – DRN
  • ProShares Ultra Real Estate - URE


Buying REIT ETFs

Since ETF is traded like a stock, investors and traders will need a brokerage to buy ETFs such as:

  • eOption – You can trade stock as well as ETF for $3.00 per trade. Investor can trade option as well.
  • TradeKing – Investor and trader can trade stock and ETF for $4.95 per trade. You can also trade mutual funds.
  • SogoTrade - Customer can buy stock online and ETF for $3.00 per trade.
  • OptionsHouse - You can trade stock, CEF, ETF for $2.95 per trade. It also offers one stop shop for mutual fund or ETF as well as cash management banking.
  • Marsco – Traders can trade stock and etf for $3.95 per trade

Disclosure: I have no affiliation with any of these ETFs. I also have no position in any of these ETFs. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.


US REIT ETF Performance - Updated 12/15/2010

(click column header to sort results)
Fund Name  
Ticker  
3 month  
1 yr  
3 yr  
5 yr  
Vanguard REIT Index ETF
VNQ
13.02%
30.68%
-5.07%
2.02%
iShares Dow Jones US Real Estate
IYR
12.99%
28.76%
-6.87%
0.75%
iShares Cohen & Steers Realty Majors
ICF
13.58%
31.56%
-8.36%
0.82%
SPDR Dow Jones REIT
RWR
13.36%
30.16%
-6.85%
1.39%
iShares FTSE NAREIT Mort Plus Cp Idx
REM
5.92%
7.11%
-12.56%
N/A
First Trust S&P REIT Idx
FRI
13.33%
29.77%
-6.83%
N/A
iShares FTSE NAREIT Resid Plus Cp Idx
REZ
12.73%
36.81%
-2.47%
N/A
iShares FTSE NAREIT Real Estate 50
FTY
12.64%
29.78%
-6.11%
N/A
PowerShares Active U.S. Real Estate
PSR
12.79%
30.22%
N/A
N/A
iShares FTSE NAREIT Industrl/Offc Cp Idx
FIO
9.09%
15.09%
-13.66%
N/A
iShares FTSE EPRA/NAREIT North America
IFNA
11.00%
28.58%
N/A
N/A
iShares FTSE NAREIT Retail Cp Idx
RTL
12.20%
28.10%
-12.13%
N/A
Wilshire US REIT ETF
WREI
13.20%
N/A
N/A
N/A
PowerShares KBW Prem Yield Equity REIT
KBWY
N/A
N/A
N/A
N/A

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