Real estate is a great asset class to consider when diversifying your long-term investment portfolio. If you're looking for exposure to the real estate market without the hassle of owning physical property, REITs (Real Estate Investment Trusts) are an efficient and effective way to achieve that. In this article, we will explore the best REIT ETFs to invest in for 2024.
Why Choose REITs?
REITs provide broad exposure to both national and international commercial and residential real estate markets by pooling investor capital and diversifying real estate buys. This strategy allows investors to avoid the risks associated with owning property in a specific location. REITs act as baskets of real estate properties that trade on exchanges, making them easily accessible and manageable. They also serve as an inflation hedge, as landlords can pass on inflation costs to tenants in the form of higher rents.
Moreover, REIT portfolios include various types of real estate properties such as apartment complexes, data centers, hospitals, hotels, office buildings, retail spaces, and warehouses. By adding REITs to your investment portfolio, you can potentially benefit from their low correlation with both stocks and bonds. This means that when stocks or bonds fall in value, REITs may rise in value, providing a diversification benefit and potentially boosting your risk-adjusted return.
The 7 Best REIT ETFs
To help you navigate the world of REIT ETFs, we have compiled a list of the top 7 options for 2024:
1. VNQ - Vanguard Real Estate ETF
Source: PortfolioVisualizer.com
The Vanguard Real Estate ETF (VNQ) is the most popular REIT ETF, with over $50 billion in assets. It tracks the MSCI US Investable Market Real Estate 25/50 Index, providing broad exposure to the U.S. real estate market. With an expense ratio of 0.12%, it offers a cost-effective way to invest in real estate.
2. VNQI - Vanguard Global ex-U.S. Real Estate ETF
Diversifying internationally is a prudent strategy, and the Vanguard Global ex-U.S. Real Estate ETF (VNQI) allows you to do just that. This ETF tracks the S&P Global ex-U.S. Property Index, providing exposure to REITs in over 30 countries worldwide. With an expense ratio of 0.12%, it offers global real estate diversification at a reasonable cost.
3. REET - iShares Global REIT ETF
For a single fund that combines U.S. and international REITs, the iShares Global REIT ETF (REET) is an excellent choice. It seeks to track the FTSE EPRA Nareit Global REITs Index and has over $3.3 billion in assets. While it has a slightly higher expense ratio of 0.14%, it offers simplicity and convenience for investors.
4. SCHH - Schwab U.S. REIT ETF
The Schwab U.S. REIT ETF (SCHH) is another low-cost option for U.S. REITs. With over $6 billion in assets, it seeks to track the Dow Jones Equity All REIT Capped Index, excluding mortgage REITs. What sets SCHH apart is its incredibly low expense ratio of 0.07%, making it the cheapest ETF on this list.
5. USRT - iShares Core U.S. REIT ETF
The iShares Core U.S. REIT ETF (USRT) tracks the FTSE NAREIT Equity REITs Index. With over $2 billion in assets and an expense ratio of 0.08%, USRT is comparable to VNQ but offers slightly less concentration in its top holdings.
6. FREL - Fidelity MSCI Real Estate Index ETF
FREL from Fidelity seeks to track the MSCI USA IMI Real Estate 25/25 Index. With a fee of 0.08% and over $1 billion in assets, FREL provides investors with a cost-effective option for gaining exposure to the U.S. real estate market.
7. REZ - iShares Residential Real Estate ETF
If you want to specifically target residential, healthcare, and public storage REITs, the iShares Residential Real Estate ETF (REZ) is an excellent choice. It tracks the FTSE NAREIT All Residential Capped Index and has an expense ratio of 0.48%. While it may have a higher expense ratio, it offers a unique focus on residential real estate.
Where to Buy These REIT ETFs
All the mentioned REIT ETFs should be available at any major broker. If you're looking for a user-friendly platform with zero trade commissions and zero account fees, consider M1 Finance. They offer a seamless investing experience with fractional shares and dynamic rebalancing. For Canadian investors, Questrade or Interactive Brokers are good options, while eToro or Interactive Brokers can be considered for investors outside North America.
Remember, investing in REITs involves risks, and it's essential to do your own due diligence before making any investment decisions. While this article provides insights into the best REIT ETFs for 2024, it is not financial advice or a recommendation to buy or sell any specific products.
Note: The author of this article has a personal investment in VNQ.
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Disclaimer: While this article presents investing-related information, it is not financial advice, investing advice, or tax advice. The information provided is for informational, educational, and entertainment purposes only. Always conduct thorough research and consult with professionals before making any investment decisions.
