Who’s left standing in the real estate exchange traded fund (ETF) category?

The real estate sector has been bearing the brunt of the credit crisis and rising interest rates, but it can still be a hedge against inflation, reports Will McClatchy for ETFZone. The sector has been a bellwether for the economy in recent months.

McClatchy puts the funds under the microscope to see which ones make strong candidates in various portfolios. It is important to clarify that no real estate ETF is exposed to single family housing, which has been the primary headache-causer many American families and the economy.

The five major broad-based or large-cap ETFs that are worthy of a core holding are:

  • Vanguard REIT(VNQ): down 7.2% year-to-date; expense ratio 0.12%
  • SPDR Dow Jones Wilshire REIT (RWR): down 1% year-to-date; 0.25%
  • iShares Cohen & Steers Realty Majors (ICF): down 7.8% year-to-date; 0.35%
  • iShares FTSE/NAREIT Real Estate 50 (FTY): down 8.5% year-to-date; 0.48%
  • First Trust S&P REIT (FRI): down 5.3% year-to-date; 0.5%

The recent withdrawal of Adelante Shares Real Estate ETFs has shrunken the choices. Most of the above funds have 100 firms, except ICF with 30 and FTY with 50. All offer exposure to industrial/office, residential apartments, storage and hotels. The indexes are all of the moment, cap-weighted baskets run by reputable firms.

All five are sitting below their long-term trend lines, so we recommend holding off until they cross the mark before considering them as an addition to your portfolio.

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.

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