In this article, I will share with you the ten best real estate ETFs in the world, including Vanguard and iShares, and an in-depth analysis of those companies.
Some of these real estate ETFs have more than $40 billion in net asset and delivers more than 3% as dividend yield every year. These ETFs can be a game changer for you if you are looking for some well-performing real estate ETFs to diversify your investment portfolio and earn some nice dividends over time.
Ten Best Real Estate ETFs in the world
Here are some of the best real estate ETFs you can invest in to make good money, starting with the Vanguard ETF, as they are the No1 in this list because of their market value and performance over a five-year period.
Table of Contents
REIT versus ETF – What is the main difference?
Most beginner investors have a huge misconception about the real estate investment trust (REIT) and real estate ETF. They think these are all the same. But it’s not. There are some differences that you need to know before investing.
A real estate ETF is a combination of many REITs and other real estate stocks created by a reputable company to offer a much more flexible way to invest in the real estate sector for an average man and to reduce their risk in the market.
As you know, there are more than 200 REITs in the market right now, and not all of them are that good. It takes a lot of research to invest in these REITs. The biggest problem is what to choose, what is the best among them? That is why some companies came forward and solved this problem by creating an entity called Real Estate ETFs.
That way, an average investor can invest freely in those REITs and other well-performing real estate stocks via these ETFs. It made investing for beginners in the real estate sector much easier than before. Let’s have a quick look at how REIT came into the world.
A Little History of Real Estate Investment Trust
REIT was introduced in 1960 by the US congress to boost the realty sector. As more and more people were becoming interested in investing in stocks. So they leveraged that stock market to raise money and buy rental properties that will generate rental income for them and us every month.
If you invest in their stocks and own a portion of their company, they will give you a share of their rental income, as the government law says. You will receive about 90% of their distributable dividend every year by investing in those REITs.
- Buying a REIT is like buying a stock. You open an account with a reputable brokerage firm and trade your money via the stock market platform. The ups and downs will determine your profit if you are an intelligent investor.
So back to the story, everything was working pretty well. But every year, the no of REITs was on the rise, and it was becoming hard for an average man to choose the best one. People were facing problems when choosing a good REIT. With that, the no of investments was declining.
So again, those brilliant minds joined and formed the ETF, where anyone can invest in those REITs and some good real estate stock via the same stock market with more control in their hands and with ease.
That increased the overall investment in the real estate sectors. More money started to flow into the industry than ever before. Time went on, and these ETFs have become the best REIT investment a person can have in their portfolio as most of them gives good returns.
- For your information, REITs own more than $4.5 trillion in real estate assets, with more than $2.5 trillion of that, from publicly listed and non-listed REITs. REITs have grown exceptionally since their formation in 1960.
So here are those ten best real estate ETFs right now.
1. Real Estate ETF Vanguard
It is one of the best real estate ETFs in the current market with a total asset of over $40 Billion with a dividend yield of 3.1%. In their portfolio, they have more than 170 stocks. Some of them are REITs, and some of them are other real estate stocks.
They have two ETFs, and those are as follows:
- Vanguard Real Estate ETF (VNQ)
- Vanguard Global Ex-U.S. Real Estate ETF (VNQI)
Here are the top three companies they have in their portfolio.
- Prologis REIT: One of the biggest real estate warehouse companies.
- American Tower REIT: The biggest wireless communications infrastructure and next-generation wireless technologies infrastructure builder.
- Equinix REIT: One of the biggest data center developers.
If you look at the current price of the Vanguard Real Estate Index Fund ETF, it’s now about $92 and on the rise. It’s one of the biggest and best real estate ETFs out there.
2. Real Estate Select Sector SPDR Fund
Another well-known ETF, it has more than $5 billion in assets. SPDR ETF only holds REITs in the S&P 500 Index and allows investors to make more direct investments in real estate.
They offer a narrower investment path to filter out the best. They have more than 30 good real estate stocks in their portfolio and have a dividend yield of 3.1% per year.
3. Real Estate ETF iShares
It gives you the highest dividend yield, about 8% (REM). That is why investors are choosing iShares ETF. They hold more than 30 good REITs in their portfolio.
iShares also have two ETFs for investing.
- iShares Mortgage Real Estate ETF (REM)
- iShares Residential & Multisector Real Estate ETF (REZ)
But there are some risks as mortgage companies have some vulnerabilities because of the interest rates. If the interest fluctuates, the price will fluctuate. So that can be a factor for the higher dividend yield. It has risks, know that.
Also read: How to invest in fractional ownership in real estate
4. The Pacer Benchmark Industrial Real Estate ETF
The dividend yield is about 1.5% might not attract you, but their track record might interest you about the INDS ETF. They have about $300 million in total assets, but they have a strong niche which makes them preferable to some investors who only invest in certain niches.
INDS invests only in industrial property REITs. Their portfolio contains the top industrial real estate companies, including:
- Duke Realty Corp.
- Stag Industrial Inc.
- Rexford Industrial Realty Inc.
They are small as a company but strong and more stable.
5. Global X Super Dividend ETF
The SRET is primarily created to target the highest dividend-yielding REITs in the world. They give about a 7.1% dividend yield with their 30 very shortlisted companies.
They invest in various sectors and various countries worldwide. A few of those companies are as follows:
- Casino operator Gaming and Leisure Properties Inc.
- Health care facilities REIT Physicians Realty Trust
- Singapore-based industrial REIT Mapletree Industrial Trust
If you want a one-stop shop that doesn’t rely on a single type of REIT but still provides good yield, SRET is for you.
6. Schwab US ETF
The biggest thing is they have more than 140 REITs in the fund. They do not invest in any non-REIT stocks. It means you will only invest in REITs, not real estate stocks. That is quite unique for SCHH as most of the ETFs invest in both.
Their top three REIT companies are as follows:
- Public Storage
- Crown Castle
- American Tower
It’s a simple and easy way to invest in REIT ETF.
7. VanEck Mortgage ETF
The dividend yield is attractive at about 10.5%. That is the best part for MORT. Again it’s a mortgage REIT, and it will come with some risks. They have about 26 holdings in their portfolio and are performing well.
MORT is for those who are looking for a reputable company with attractive dividend yields.
8. Goldman Sachs Future Equity ETF
Everybody knows Goldman Sachs, and some of you know about the 2008 financial crisis. But today, their ETF is performing pretty well. The ETF company was founded in Nov 2021 and doesn’t have a long-term history, but they have a stable team of managers who can make the fund work. That is what experts say.
As it’s on the growth path, the dividend yield is not that attractive, just 1.38%. But it s growing, and some people think it will become one of the best real estate ETFs in the world.
9. Xtrackers International ETF
HAUZ provides a dividend yield of 2.38% and has more than 1,000 holdings in the portfolio. The biggest than any ETF in the current situation. The fund covers companies from across the globe, from Japan, Australia, and the United Kingdom, representing 45% of the fund’s total assets.
There are not many global ETFs bigger than HAUZ. It can be a good option for investing.
10. Invesco Active U.S. ETF
PSR’s Dividend yield is 2.61%. It has more than 80 companies in its portfolio. They have been involved in many different sectors, including:
- Leasing management
- Construction
- Financing
- Sale of real estate
Experts say PSR’s annual five-year return beat the VNQ’s returns.
Please note: All these data are taken from various authoritative internet sources. Make sure you verify all these before investing. I don’t recommend you to invest. It’s your choice, okay?
Last Words
So there are the top ten best real estate ETFs in the world that you can invest in and make money or diversify your investment portfolio. I hope you liked the article. Thanks for reading. See you soon.
