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Real estate investment trust exchange-traded funds are becoming more popular as real estate values continue to soar, and many expect this trend will continue moving forward. But what are REIT ETFs, and what are the three best options on the market?
What Are REITs?
REITs are a form of an investment fund. Their portfolios include real estate holdings designed to provide price appreciation and income for investors. These holdings can range from single-family homes to strip malls to commercial buildings that span several acres.
Real estate ETFs incorporate diversified REIT holdings. These investments generate strong returns, too. REITs produced an average return of more than 16% in the fourth quarter of 2021, outpacing the 11% generated by the S&P 500.
3 Real Estate ETFs To Buy Right Now
The three best real estate ETFs to buy in 2022 include:
1. Vanguard Real Estate ETF (VNQ)
- Net assets: $84.11 billion
- Expense ratio: 0.12%
- Performance: VNQ is up over 13% over the past year.
- Holdings: A heavily diversified list of REITs with a focus on office buildings, hotels and other properties.
The Vanguard Real Estate ETF is the largest real estate ETF on the market by total assets. It provides a diversified list of REIT holdings designed to track the returns of the MSCI US Investable Market Real Estate 25/50 Index. The fund provides investors with a high level of income, though they can also expect some price appreciation.
Vanguard offers some of the lowest expense ratios in the business. The average expense ratio on Vanguard ETFs is 0.06%, though the VNQ has a slightly higher annual cost of 0.12%. Nonetheless, the fund’s fees are half of the industry average, which is 0.24% annually.
2. Charles Schwab US REIT ETF (SCHH)
- Net assets: $7.09 billion
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