Real Estate ETF 101 | ETF Trends

There are so many real estate focused exchange traded funds (ETFs) and many investors have so little time to really investigate where their money is actually going. There are four major funds to look at and pull apart to consider if they are worthy of your portfolio.

Some good news for housing, as new home sales in the U.S. grew in August to the highest level in over one year. Builders cut pricing to compete with foreclosures and previously owned homes, reports Bob Willis for Bloomberg. If the worst housing slump since the Great Depression is finally turning, there are good ways to play the upward trend.

There is a so-called “big four” when it comes to domestic real estate or REIT, ETFs to pick from is you so desire the asset class for your portfolio. Don Dion for The Street says the following four are worth your consideration due to low fees, liquidity and diversification:

  • iShares Dow Jones U.S. Real Estate (NYSEAcra: IYR)

The most popular ETF,with 24 million shares traded per day. Expense ratio is 0.48%, and there are $2.9 billion assets under management. IYR tracks the Dow Jones U.S. Real Estate Index, a float-adjusted, market-cap weighted index. Top 20 holdings are timber REITs.

  • iShares Cohen & Steer Realty Majors (NYSEArca: ICF)

About 1 million shares per day are traded, and the expense ratio is 0.35%. Assets under management is at $1.7 billion. ICF follows the Cohen & Steers Realty Majors Index, takes into account management, portfolio quality and sector and geographic diversification. It rebalances quarterly such that no fund exceeds 8% of assets.

  • Vanguard REIT (NYSEArca: VNQ)


VNQ has about 20 more holdings than most other REIT ETFs, and the sum of their allocations only came to 2.4% as of June 30. VNQ had $3.4 billion at the end of August and costs 0.15%. About 3 million shares per day are traded. This is a great buy-and-hold fund, but this ETF is not recommended for those who want up-to-date information on asset allocation. Since the fund does not re-balance quarterly as the others do, up-to-date information on holdings is not readily available. The low fees are unbeatable from a long term investor standpoint.

  • SPDR Dow Jones REIT (NYSEArca: RWR)


RWR has $1.3 billion in assets and has an expense ratio of 0.25%. About 0.8 million shares trade per day, and  tracks the Dow Jones U.S. Select REIT Index, a float-adjusted, market cap-weighted index that rebalances quarterly. Compares the closest to IYR as far as holdings are concerned.

For more stories about real estate, visit our real estate category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.