Equity real estate investment trust (REIT) exchange traded funds (ETFs) are an easy way for investors to allocate a portion of their portfolios to the institutional-quality commercial real estate asset class.
According to Forbes, the four most popular funds are Vanguard REIT Index Fund (NYSEARCA:VNQ), iShares Dow Jones US Real Estate (ETF)(NYSEARCA:IYR), iShares Cohen & Steers Realty Maj. (ETF)(NYSEARCA: ICF), and SPDR Dow Jones REIT ETF (NYSEARCA:RWR).
The ETFs each own a basket of REIT shares in an attempt to mirror the performance of a published REIT.
In the aggregate, these four REIT ETFs account for almost 94 percent of the total REIT ETF market.
Do REITs Really Help Diversify A Portfolio?
The short answer is yes.
Owning shares of REITs in addition to bonds, stocks, CDs or money market funds, has been shown by numerous studies to result in a more diversified portfolio.
Source: NAREIT
REIT Relative Outperformance
Equity REITs outperformed the broader market post dot-com bubble, and of course during the go-go real estate bubble which burst in 2008.
However, it is notable that even during financial crises, and through the Great Recession, equity REITs outperformed both the S&P 500 and Russell 2000 indices.
All 4 REIT ETFs Performed Well This Year
Still, there was a broad range of performance due to the differences in the underlying basket of stocks that comprise the particular index being closely tracked.
Very Efficient ...
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