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    Home»Property»5 Best REIT ETFs for 2024
    Property

    5 Best REIT ETFs for 2024

    July 23, 20249 Mins Read


    Real estate has been a great vehicle for increasing wealth. According to Forbes, real estate has been the primary wealth-creating vehicle for 25 of the country’s top 400 billionaires. Meanwhile, it has helped countless millionaires amass and enhance their wealth.  

    An infographic defining and explaining real estate investment trust (REIT) exchange-traded funds (ETFs).

    Image source: The Motley Fool.

    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). 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.

    Best REIT ETFs

    Best REIT ETFs

    Congress created REITs in 1960 to allow anyone 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. They must distribute at least 90% of their taxable net income to shareholders via dividend payments to remain in compliance with IRS regulations. 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 almost 200 publicly traded REITs focused on a dozen property sectors, it can be challenging for beginning investors to know where to start. While you could invest in individual REITs, you risk picking the wrong ones that are at risk of a dividend cut.

    That’s where ETFs can help. These entities hold several REITs and other real estate stocks, giving investors broad exposure to the sector, which helps reduce risk. Some of the top real estate ETF options are:

    Data source: ETFdb and YCharts. Performance and AUM data as of July 18, 2024.
    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) 9.4% 9/23/2004 The Vanguard Group $34.1 billion
    iShares U.S. Real Estate ETF (NYSEMKT:IYR) 9.2% 6/12/2000 BlackRock (NYSE:BLK) $3.3 billion
    Schwab U.S. REIT ETF (NYSEMKT:SCHH) 10.7% 1/13/2011 Charles Schwab (NYSE:SCHW) $6.8 billion
    Real Estate Select SPDR Fund (NYSEMKT:XLRE) 10.2% 10/7/2015 SSGA Funds Management, Inc. $6.4 billion
    iShares Cohen & Steers REIT ETF (NYSEMKT:ICF) 11.0% 1/29/2001 BlackRock $2.1 billion

    Here’s a closer look at these top REIT ETFs.

    Our list

    Vanguard Real Estate ETF

    The Vanguard Real Estate ETF is a behemoth among REIT ETFs, with more than five times the assets under management of its nearest competitor. It invests in REITs and other real estate stocks. In mid-2024, the ETF held about 150 real estate stocks, led by the following five:

    1. Vanguard Real Estate II Index Fund: 13.4% of the portfolio
    2. Prologis (PLD 2.29%): 6.7%
    3. American Tower (AMT 3.13%): 5.9%
    4. Equinix (EQIX 1.1%): 4.5%
    5. Welltower (WELL 1.32%): 3.8%

    This broad REIT ETF offers investors several forms of diversification. Of its more than 150 stocks, its largest holding is a related REIT index fund that also holds shares of more than 150 REITs and real estate stocks. Meanwhile, its other top five holdings include the biggest REITs by market cap. This list features the largest industrial REIT (Prologis), the top infrastructure REIT (American Tower), the leading data center REIT (Equinix), and the biggest healthcare REIT (Welltower). That gives investors some diversification across property types.

    Overall, its 10 largest holdings make up almost 50% of its portfolio. As a result, the ETF offers broad exposure to the entire REIT sector, with a focus on the largest REITs that dominate the industry.

    One factor that sets the Vanguard Real Estate ETF apart from others is its ETF expense ratio. At 0.13%, it’s far less than the industry average of 1.07% of similar funds. That enables investors to keep more of their returns.

    That includes the REIT ETF’s enticing dividend yield of around 3.6%.

    iShares U.S. Real Estate ETF

    The iShares U.S. Real Estate ETF invests in domestic real estate stocks and REITs. This ETF, managed by BlackRock, had about 70 stock holdings as of mid-2024, led by the following five:

    1. Prologis: 8.3%
    2. American Tower: 7.3%
    3. Equinix: 5.8%
    4. Welltower: 4.5%.
    5. Digital Realty Trust (DLR 0.99%): 4.0%.

    Those are the five of the biggest REITs and operate across several property types, including industrial, communications infrastructure, data centers, and self-storage REITs. Overall, the ETF’s 10 largest holdings make up 47% of its portfolio, providing investors with slightly more diversification than Vanguard’s ETF even though it has half the number of stocks.

    One of the downfalls of this REIT ETF is its expense ratio. At 0.40%, it’s well above the industry average, so it has slightly underperformed its benchmark over the years as the higher fee has eaten into its returns.

    The higher fee also eats into the REIT ETF’s 3.1% dividend yield.

    Schwab US REIT ETF

    This ETF provides simple access to REITs since it only holds those entities, unlike other ETFs that include non-REIT real estate stocks in their portfolio. It had almost 120 REITs in the fund as of mid-2024, led by the following five:

    1. American Tower: 9.4%
    2. Prologis: 7.3%. 
    3. Equinix: 4.6%. 
    4. Welltower: 4.2%.
    5. Simon Property Group (SPG 2.65%): 4.2%.

    Like many other REIT ETFs, the Schwab fund holds REITs based on their market cap instead of using an equal weighting system, so it has nearly identical top holdings as most other top REIT ETFs. Meanwhile, its top 10 make up almost 47% of its portfolio.   

    Its expense ratio stands out. It’s an ultra-low 0.07%, allowing investors to keep more of the returns from the underlying REITs. That includes their lucrative dividend income (3.9% dividend yield).

    Real Estate Select SPDR Fund

    The Real Estate Select SPDR Fund allows investors to make a more direct investment in real estate. The ETF only holds REITs in the S&P 500 index, which limits its investment pool. As of mid-2024, this ETF held only 31 REITs, led by some familiar names:

    1. Prologis: 10.9%.
    2. American Tower: 9.5%.
    3. Equinix: 7.3%.
    4. Welltower: 6.1%.
    5. Digital Realty Trust: 4.8%.

    As the five largest REITs, it’s no surprise to see this group leading the way. And because this ETF concentrates only on REITs in the S&P 500, its top 10 holdings made up more than 60% of its portfolio. That makes it an ideal option for investors seeking to focus on the largest REITs.

    The ETF has a low expense ratio of 0.09%. Consequently, it’s a solid option for investors seeking low-cost exposure to the biggest REITs. They pay attractive dividends, which drives the REIT ETF’s roughly 3.3% dividend yield.

    iShares Cohen & Steers REIT ETF

    The iShares Cohen & Steers REIT ETF is another REIT ETF managed by BlackRock. It takes a slightly different approach to invest in REITs, focusing on large real estate companies that are dominant in their respective property categories. As a result, it has a concentrated portfolio of 30 REITs.

    However, these 30 include some familiar names, led by:

    1. American Tower: 8.1%
    2. Prologis: 8.0%.
    3. Equinix: 7.1%.
    4. Welltower: 6.8%.
    5. Simon Property Group: 5.4%.

    Overall, its top 10 holdings made up 58% of its portfolio as of mid-2024.

    Because the ETF takes a more active approach to investing in REITs, it charges a relatively higher expense ratio of 0.33%. It also offered a lower dividend yield (2.7%). It’s best for investors who want to focus on the dominant REITs without limiting themselves to only those in the S&P 500. 

    Related investing topics

    These ETFs make it easy to invest in REITs

    REITs have historically generated attractive total returns for investors by providing them with above-average dividend income and price appreciation. With so many great ones to choose from, it can be hard for investors to determine the best REITs for their portfolio. That’s where REIT ETFs can help. They make it easy to invest in the sector by providing investors with broad exposure to the leading REITs. While most REIT ETFs have similar top holdings, all of the best ones offer their own unique spin, giving investors several excellent options.

    FAQ

    FAQ on REIT ETFs

    Are REIT ETFs a good investment?

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    REIT ETFs can be good investments. They provide investors with diversified exposure to the real estate sector, which has historically delivered attractive total returns. REITs have outperformed stocks over the long term. In addition, REITs are good inflation hedges and supply dividend income.

    What is the largest REIT ETF?

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    Vanguard Real Estate ETF is the largest REIT ETF by assets under management, with more than $34 billion in mid-2024.

    Are REITs still a good investment?

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    REITs have historically been very good investments over the long term. According to our data on REITs versus stocks, REITs have outperformed stocks over longer periods (20+ years).

    While past success does not guarantee similar returns in the future, REITs could continue to be a good investment. Falling interest rates, rising demand for certain property types, and dividend income could enable REITs to continue producing attractive returns for investors.

    What are the top 5 largest REITs?

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    According to NAREIT, the five largest publicly traded REITs by market cap in mid-2024 were:

    1. Prologis: $102 billion.
    2. American Tower: $91 billion.
    3. Equinix: $71 billion.
    4. Welltower: $57 billion.
    5. Simon Property Group: $49 billion.
    Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Matt DiLallo has positions in American Tower, Digital Realty Trust, Equinix, and Prologis and has the following options: long January 2026 $170 calls on American Tower and short January 2026 $175 calls on American Tower. The Motley Fool has positions in and recommends American Tower, Charles Schwab, Digital Realty Trust, Equinix, Prologis, and Vanguard Real Estate ETF. The Motley Fool recommends Simon Property Group and recommends the following options: long January 2026 $180 calls on American Tower, long January 2026 $90 calls on Prologis, short January 2026 $185 calls on American Tower, and short September 2024 $77.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.



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