Real Estate Investment Trust or REITs are a fantastic way to earn money where you can taste the ownership of the underlying assets. If you want to get a guaranteed dividend from an investment, REIT ETFs are a good option.
In the following section, we will guide you to the top 10 REIT ETFs to buy in 2021, including a complete REIT ETFs trading guide.
Exchange-Traded Funds are very flexible to young investors as it is less costly than the traditional stock market. Here’s what to know about REIT ETFs before investing.
What Are REIT ETFs?
REIT ETFs are exchange-traded funds that hold REITs and REIT stocks. It is a great way to diversify the trading portfolio if you cannot invest in real estate directly.
Investing in real estate or REITs is not affordable to most traders. Therefore, trading ETFs is the best way to join this sector with portfolio diversification.
Investors can buy and sell ETFs like other stocks and trading instruments. Moreover, most of the trading information is available publicly that helps traders choose the best investment option.
How to Trade and Invest In REIT ETFs?
Open a Trading Account
First, you have to open a trading account with a broker by clicking on a specific location. As soon as you click the open a new account, it will ask you for your full name, address, email addresses, etc. and you should provide all information.
Choose REIT ETFs
After opening the account, move to the trading platform where tradable assets are listed. Later on, you have to open the list of ETFs that you are looking for. After that, you have to fund your account with a suitable payment method and start trading.
Place Your Trade
After getting the list of REIT ETFs, it is time to take the trade. In ETFs trading, you can take both buy and sell positions on an intraday basis. Before entering a trade, you should perform extensive analysis on the particular ETF and open the trade with an appropriate money management system.
Where Can I Trade REIT ETFs?
Many brokers allow trading in REIT ETFs. Therefore, you may find it easy to start trading with a broker, but the challenging factor is identifying the most reliable broker.
What is the sign of a reliable broker?
A good broker always remains transparent regarding their service and offers. Furthermore, regulation is mandatory for a broker to ensure maximum transparency in their service.
On the other hand, a good broker usually provides live market analysis, technical and fundamental aspects of underlying assets, live trading sessions, and webinars to make traders profitable.
Based on our study and research, we recommend the top 3 brokers in the below section; where you can start REIT ETFs trading:
Best REIT ETFs to Buy Now
We have prepared the following list of the best 10 REIT ETFs to trade because of their excellent liquidity, historical performance, and the strong team behind them:
- Vanguard Real Estate ETF (VNQ)
- VanEck Vectors Mortgage REIT Income ETF (MORT)
- Vanguard Global ex-U.S. Real Estate ETF (VNQI)
- iShares U.S. Real Estate ETF (IYR)
- Global X Data Center REITs & Digital Infrastructure ETF (VPN)
- iShares Residential Real Estate ETF (REZ)
- Schwab U.S. REIT ETF (SCHH)
- U.S. Diversified Real Estate ETF (PPTY)
- iShares Core U.S. REIT ETF (USRT)
- iShares Cohen & Steers REIT ETF (ICF)
Vanguard Real Estate ETF (VNQ)
The Vanguard Real Estate ETF offers a wide range of real estate investments with an expense ratio of 0.12%. This investment includes different types of properties, from industrial to residential and healthcare sectors. Moreover, this fund includes almost 180 different equity REITs that may diversify your trading portfolio. If you want to add ETFs in American Tower Corp (AMT), Crown Castle International Corp. (CCI), and Prologis (PLD), you should include VNQ in the list of best REIT ETFs for 2021.
VanEck Vectors Mortgage REIT Income ETF (MORT)
VanEck Vectors Mortgage REIT Income ETF is a mortgage and mortgage-backed ETF with a higher earning potential than traditional real estate or mortgage REITs.
MORT provides an earnings yield of 8% with an expense ratio of 0.5%. However, the attractive yield of this company might be altered by the interest rate risk. MORT holds an interest rate risk, where you may face a financial loss in case of the rate increase. However, as the Fed vowed to keep the interest rate low, MORT may provide stable growth in 2021.
Vanguard Global ex-U.S. Real Estate ETF (VNQI)
Vanguard Global ex-U.S. Real Estate ETF is a solid way to diversify the trading portfolio to international REITs.
This ETF tracks the S&P Global ex-US Property investment in more than 30 countries in the world. VNQI has more than 640 holdings with an expense ratio of 0.12%. Therefore, you should pay 12% for every 10,000$.
iShares U.S. Real Estate ETF (IYR)
iShares U.S. Real Estate ETF is one of the leading real estate ETFs that was established in 2000. This fund consists of more than 80 holdings with an expense ratio of 0.42%.
If we compare the IYR with VNQ, we will find the VNQ more cost-efficient. However, the last three years' cumulative total return is higher for IYR at 16.3%, which is very attractive for investors. Therefore, if you want to hold a wide range of different REITs, you can consider this ETF a reliable investment opportunity in 2021.
Global X Data Center REITs & Digital Infrastructure ETF (VPN)
Global X Data Center REITs & Digital Infrastructure ETF is suitable for investors who focus on balanced exposure with investments from data center stocks, like Digital Realty (DLR) or Equinix (EQIX).
Any investment backed by the tech infrastructure is reliable for providing market growth in 2021.
This fund started the operation in October 2020 and carried an expense ratio of 0.5%. Moreover, its return since the inception is 3.6% that is very lucrative for 2021.
iShares Residential Real Estate ETF (REZ)
Despite the name, iShares Residential Real Estate ETF holds most of the commercial real estate investment. Moreover, if you are interested in diversifying the portfolio on residential, commercial, healthcare, and public storage REITs, REZ would be the best option.
This ETF tracks the FTSE NAREIT All Residential Capped Index and asks for an expense ratio of 0.48%.
Schwab U.S. REIT ETF (SCHH)
Schwab U.S. REIT ETF is a combination of both mREITs and equity with an expense ratio of 0.07%. Moreover, its unique feature is that no companies hold more than 10% weight of the investment.
SCHH carries more than 140 holdings with a weighted average market cap of almost $34B. Almost 43.5% of investment comes from specialized REITs and 41.7% from commercial REITs. If you want to catch the 3% yield providing an instrument, you should include SCHH in the list of best REITs ETFs for 2021.
U.S. Diversified Real Estate ETF (PPTY)
U.S. Diversified Real Estate ETF provides diversification in the real estate investment. The core elements of this investment are from residential, industrial, and office REITs. This fund includes a multi-cap ETF with multiple companies with different market caps with stable volatility.
PPTY includes companies with strong balance sheets with a high amount of debt. This fund initiated the operation in 2018 and provided a total return of 27.4% since its inception. Currently, PPTY holds an expense ratio of 0.49% that may influence investors to keep it on the best REIT ETFs list.
iShares Core U.S. REIT ETF (USRT)
iShares Core U.S. REIT ETF tracks the FTSE NAREIT Equity REITs index. The market cap of this instrument focuses on health care, residential and retail REITs. This ETF slashed its fee and is now considered as the lowest holding cost in this segment.
Therefore, if you want to join the $1.64B market value instrument with an expense ratio of 0.08%, you should include this ETF to the list of best REIT ETFs for 2021.
iShares Cohen & Steers REIT ETF (ICF)
iShares Cohen & Steers, REIT ETF aims to capture the top 10 US real estate markets that are large and liquid based on the securitization and consolidation.
Currently, ICF holds $1.99B assets under management with an expense ratio of 0.34%. Moreover, its daily trading volume is $7.91M and its stable price action may influence investors to consider it as a potential opportunity for 2021.
Expert Tip on Investing In REIT ETFs
Financial trading success depends on how a trader is implementing his trading knowledge with strong trading psychology. Moreover, understanding the real estate business is very important for every REIT ETFs trader. Many companies create mutual funds and REIT ETFs from where you should choose the most reliable and well-known one. You can make a list of the most reliable companies and identify the appropriate one by observing their services. However, every investment in the world carries a risk that you cannot ignore. So you should consider the macro and micro economic outlook before investing. REITs directly related to the consumer and institutional investment that may affect the central bank’s decision. Therefore, you should monitor the interest rate, employment rates, GDP, consumer spending, etc.
Why Trade REIT ETFs?
If you think that REIT ETFs are a good investment option for you, you need to decide on the specific investment instrument.
Any ETF with larger assets under management may require lower costs. In that case, REIT ETFs are one step ahead of other sectors as the real estate business is very profitable when the economic condition is stable.
On the other hand, if you focus on diversifying your investment in different sectors, you can include REIT ETFs. Moreover, investors can buy multiple ETFs from multiple management companies taking away the risk a particular property manager has done by operating its holdings.
However, there are no perfect ETFs in REIT, and the advantage of this sector depends on investors’ choice and personality.
Frequently Asked Questions
The number one REIT ETF depends on market capitalization, expense ratio, fundamental indicators, etc.
REIT ETFs provide a good return in a stable economy. Therefore, it is a good investment when the economic condition is good or going to be good.
Most of the investors in REIT ETFs are retail investors.
A share is a unit of stock, while REIT ETFs are a basket of stocks. In REIT ETFs trading, traders can buy and sell the position on an intraday basis.
For beginners, it is often difficult to invest in REITs directly. Therefore, it is good to start trading with REIT ETFs.
The total size of the REIT ETF is not available right now.