Real estate has been a great vehicle for increasing wealth. According to Forbes, real estate was the primary wealth-creating vehicle for 215 of the world’s 2,755 billionaires. Meanwhile, it has helped countless millionaires amass and enhance their wealth. However, real estate investing isn’t just for the rich. Thanks to Congress, anyone can invest in wealth-creating commercial real estate through real estate investment trusts (REITs). And the financial service industry has made it even easier to invest in a diversified portfolio of commercial real estate by developing several exchange-traded funds (ETFs) focused on the sector.
Here’s a closer look at how these two investment vehicles can combine into an easy way to start investing in real estate.
Top REIT ETFs
Congress created REITs in 1960 to allow the average investor to participate in the wealth-creating ability of cash-flowing commercial real estate. These entities own pools of rental properties or real estate-backed loans that generate rental or interest income, which REITs must distribute to their shareholders via dividend payments. REITs require less work and capital than buying a property outright. They’re also less risky, highly liquid, and have historically delivered strong performances versus the S&P 500.
However, with more than 200 publicly traded REITs focused on a dozen property sectors, it can be challenging for beginning investors to know where to start. That’s where ETFs can help. These entities hold several REITs and other real estate stocks, giving investors broad exposure to the sector. Some of the top real estate ETF options are:
| Top REIT ETFs | Ticker Symbol | Performance (Total Returns) Over the Past 12 Months | Inception Date | Issuer | Assets Under Management (AUM) |
|---|---|---|---|---|---|
| Vanguard Real Estate ETF | (NYSEMKT:VNQ) | 30.5% | 9/23/2004 | The Vanguard Group |
$83.3 billion |
| iShares U.S. Real Estate ETF | (NYSEMKT:IYR) | 28.1% | 6/12/2000 | BlackRock (NYSE:BLK) |
$7.3 billion |
| Schwab U.S. REIT ETF | (NYSEMKT:SCHH) | 29% | 1/13/2011 | Charles Schwab (NYSE:SCHW) |
$6.2 billion |
| Real Estate Select SPDR Fund | (NYSEMKT:XLRE) | 27.7% | 10/7/2015 | SSGA Funds Management, Inc. |
$4.3 billion |
| iShares Cohen & Steers REIT ETF | (NYSEMKT:ICF) | 27.3% | 1/29/2001 | BlackRock |
$2.4 billion |
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