Many investors want to invest in the real estate sector but do not know where to start. There are various ways that investors can approach this idea. One of the best ways is through ETFs or share investments which give you instant exposure to different global real estate companies. It is no secret that the US real estate market has been hot over the past few years, with property prices ballooning beyond what those who have taken out loans can afford and demand property, giving investors a big return. However, some countries such as China and Japan have not had much luck, so their share prices get hit hard when trying to invest elsewhere globally. These and other factors have led many investors to look overseas for better returns on their real estate ETFs. We have been following the real estate market over the past few years, and these are our findings for the best REIT ETFs for Q2:
VNQ: Vanguard REIT Index Fund (USA)
This is probably one of the best because it tracks many different real estate companies in America. It includes industrial and commercial properties, which have delivered an average annual return of 9% over the past decade. This has been diversified across 11,000 properties so that no single property can crash the fund's overall price. This can be a good thing at times because the fund can buy the most in-demand properties and have them removed from the portfolio to make room for something else. This means that it never gets stuck with a bad property for long enough to drop dramatically, allowing you to sell at a better price.
IYR: iShares FTSE NAREIT Residential Investment (USA)
This ETF tracks only residential real estate in America. It has delivered an average annual return of 8% over the past decade. It includes both single-family homes and multi-family rentals, which are particularly popular due to the low rents per property and high yields (profit). This has a huge number of properties in the portfolio which is 4,000, and it is thought to be one of the most accurate real estate ETFs on the market. This is because there are so many different properties that it would be hard for any company to influence the overall market price.
REZ: Guggenheim S&P 500 Equal Weight REITs (USA)
This ETF looks only at 1,500 of the biggest companies within the US real estate sector, which have delivered an average annual return of 8.5% over 10 years. It does this by looking at the median company across the index instead of the biggest ones and, therefore, can give you a wider variety of properties and a broader spread. This can be good because big companies can crash when there are fewer buyers or investments in any particular sector.
VGK: Vanguard Global ex-U.S. Real Estate ETF (USA)
This fund invests in 3,000 property companies located outside of America. It has delivered an average annual return of 9% over the past decade. It has done this by investing in commercial and residential properties worldwide, outperforming other REITs that invest only in their home market. Of course, this is only a good idea if you are willing to put up with the increased risk involved.
ZION: iShares Dow Jones US Real Estate (USA)
This ETF includes a wide variety of properties with an average annual return of 8% over the past decade and has a huge number of properties in its portfolio which is 6,000. Its top twenty companies include retailers and other property types, including dwellings for retirees and industrial parks. This can be difficult because it can be hard to predict what property market will do well, especially in America, where real estate is so big. There are so many different ways that it can move.
VNQI: Vanguard REIT Index Instl (USA)
This is another of the best because it tracks many different real estate companies in America. It includes industrial and commercial properties and has an excellent distribution across them. It has delivered an average annual return of 9% over the past decade. Still, it can be hard because real estate prices vary greatly across America. For example, real estate in Texas can be perfect, but it is also very bad in some other places. Therefore, it is essential to look at the overall picture of each area to get an idea of which properties will do well in the future.
Takeaway
The best REIT ETFs for Q2 2022 offer investors a way to get exposure to the real estate market without picking individual stocks. These funds provide diversification and stability, making them a smart choice for those looking to add some real estate exposure to their portfolios.
