Disruptive technologies like AI and EVs have the potential to pay sizable dividends for those who can clearly foresee their future contributions to society. However, investing in these forward-thinking sectors is not for everyone. There remains a need for more traditional, lower-stakes investing, and to fill this void, investors may continue turning to real estate – an asset class that will always have a certain level of demand.
With that in mind, we have listed 5 of the top real estate ETFs built to provide investors with exposure to both residential and commercial opportunities.
Real Estate Focused Exchange Traded Funds (ETFs)
*Note: ETFs are ranked by Net Assets of Funds in USD at the time of writing*
1. Vanguard Real Estate ETF
The Vanguard Real Estate ETF (VNQ) is designed to provide broad exposure to U.S. real estate investment trusts (REITs). The fund aims to reflect the performance of the MSCI US Investable Market Real Estate 25/50 Index, which includes a wide array of REITs and real estate companies.
Key holdings of this fund include the following companies,
- Vanguard Real Estate II Index Fund (VRTPX)
- Prologis Inc. (PLD)
- American Tower Corp. (AMT)
- Equinix Inc. (EQIX)
- Welltower Inc. (WELL)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$62.1 billion | 0.13% | 4.74% | -2.57% | 2.93% |
VNQ is managed by Vanguard, a company renowned for its commitment to low-cost investing and broad market exposure. The fund provides investors with diversified access to the real estate sector, including residential, commercial, and specialized REITs.
What sets it apart from direct competitors?
- Broad Exposure: VNQ offers exposure to a diverse range of REITs, covering various real estate sectors such as residential, commercial, and industrial properties.
- Low Expense Ratio: The fund’s expense ratio is very competitive, making it a cost-effective option for real estate investors.
- Market Leader: Vanguard’s reputation and extensive resources provide stability and reliability, ensuring consistent fund management and performance.
VNQ was launched in September 2004 and has become one of the largest and most popular real estate ETFs, known for its comprehensive market coverage and low costs.
2. Schwab U.S. REIT ETF
The Schwab U.S. REIT ETF (SCHH) is designed to track the performance of the Dow Jones U.S. Select REIT Index. The fund focuses on equity REITs and aims to provide investors with exposure to the U.S. real estate market.
Key holdings of this fund include the following companies,
- Prologis Inc. (PLD)
- American Tower Corp. (AMT)
- Equinix REIT Inc. (EQIX)
- Welltower Inc. (WELL)
- Digital Realty Trust REIT Inc. (DLR)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$6.8 billion | 0.70% | 5.79% | -1.67% | 0.68% |
SCHH is managed by Schwab, which is known for its investor-friendly approach and low-cost investment options. The fund targets a specific subset of the real estate market, providing focused exposure to equity REITs.
What sets it apart from direct competitors?
- Low Expense Ratio: SCHH offers one of the lowest expense ratios in the real estate ETF market, making it an attractive choice for cost-conscious investors.
- Focused Exposure: The fund focuses exclusively on equity REITs, providing targeted exposure to income-generating real estate.
- Investor-Friendly: Managed by Schwab, known for its commitment to providing low-cost, high-value investment options.
SCHH was launched in January 2011 and has gained popularity for its cost-effective exposure to the U.S. REIT market.
3. The Real Estate Select Sector SPDR Fund
The Real Estate Select Sector SPDR Fund (XLRE) provides precise exposure to companies from real estate management & development and REITs. The fund aims to offer targeted investment in the real estate sector.
Key holdings of this fund include the following companies,
- Prologis Inc. (PLD)
- American Tower Corp. (AMT)
- Equinix REIT Inc. (EQIX)
- Welltower Inc. (WELL)
- Digital Realty Trust REIT Inc. (DLR)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$6.46 billion | 0.95% | 5.57% | -1.41% | 4.31% |
XLRE is managed by State Street, part of the Select Sector SPDR series, which provides sector-specific exposure. The fund targets companies in the real estate management & development and REIT sectors.
What sets it apart from direct competitors?
- Sector-Specific Exposure: XLRE is part of the Select Sector SPDR series, offering precise and targeted exposure to the real estate sector.
- Competitive Expense Ratio: The fund provides a low expense ratio, making it an affordable option for sector-specific investments.
- Established Management: Managed by State Street, a trusted name in the ETF industry.
XLRE was launched in October 2015 and has become a popular choice for investors seeking targeted exposure to the real estate sector.
4. iShares U.S. Real Estate ETF
The iShares U.S. Real Estate ETF (IYR) seeks to track the investment results of an index composed of U.S. equities in the real estate sector. The fund aims to provide diversified exposure to real estate investment trusts (REITs) and real estate companies.
Key holdings of this fund include the following companies,
- Prologis Inc. (PLD)
- American Tower Corp. (AMT)
- Equinix REIT Inc. (EQIX)
- Welltower Inc. (WELL)
- Digital Realty Trust REIT Inc. (DLR)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$3.41 billion | 0.40% | 4.54% | -2.26% | 2.76% |
IYR is managed by BlackRock, a global leader in investment management. The fund offers investors broad exposure to the real estate sector, including REITs and other real estate companies, making it a solid option for diversifying portfolios.
What sets it apart from direct competitors?
- Comprehensive Sector Coverage: IYR provides exposure to a wide range of real estate sectors, including office, industrial, residential, and specialized REITs.
- Established Management: Managed by BlackRock, ensuring professional and experienced oversight.
- High Liquidity: IYR is known for its high liquidity, making it easier for investors to buy and sell shares.
IYR was launched in June 2000 and has grown to be a popular choice for investors seeking diversified exposure to the U.S. real estate market.
5. SPDR Dow Jones REIT ETF
The SPDR Dow Jones REIT ETF (RWR) seeks to track the performance of the Dow Jones U.S. Select REIT Index. The fund focuses on large, liquid REITs, providing investors with stable and high-quality real estate exposure.
Key holdings of this fund include the following companies,
- Prologis Inc. (PLD)
- Equinix REIT Inc. (EQIX)
- Welltower Inc. (WELL)
- Realty Income Corp. (O)
- Digital Realty Trust Inc. (DLR)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$1.49 billion | 0.25% | 6.97% | -0.33% | 2.53% |
RWR is managed by State Street, focusing on large and liquid REITs. The fund aims to provide investors with stable returns and high-quality real estate exposure.
What sets it apart from direct competitors?
- Large, Liquid REITs: RWR focuses on large, liquid REITs, ensuring stable and reliable investment options.
- Experienced Management: Managed by State Street, providing experienced and professional oversight.
- Diversified Exposure: The fund offers diversified exposure to high-quality REITs across various sectors.
RWR was launched in April 2001 and has gained a reputation for providing reliable and stable real estate investments.
Final Thoughts on Real Estate ETFs
Housing and commercial real estate are fundamental needs worldwide that boast low volatility relative to many disruptive tech stocks. As a result, it will always remain an attractive and relatively stable asset class. For those who believe they could benefit from exposure to this sector, look no further than the real estate ETFs listed in this article.
Make sure to visit our look at the top online brokers that can help you invest and gain exposure to what may be lucrative opportunities.