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REIT ETF |
REIT ETF
Posted by: ETF Guy in List of ETFs
You've no doubt heard that for the last several years the real estate
market has been hot with returns exceeding many other asset classes.
Fortunately for stock market investors there is a way to tap in to that
growth with Real Estate Investment Trust (REIT) ETFs.
REITs are companies that own and operate portfolios of commercial and
residential real estate. Unlike typical companies they are required to
pay out much of their profits in the form of dividends to qualify for
corporate tax breaks. This payout plus the belief that REITs will not
move together with stocks makes them an important diversification tool.
As with other ETFs, the REIT ETFs are baskets of stock of multiple
companies. Barclay's offers two such REITs: one based on Cohen & Steers
Realty Majors Index (ICF) and one based on the Dow Jones U.S. Real
Estate Index (IYR). Both are very similar, but the Cohen & Steers index
has an expense ratio of 0.35% vs. the Dow Jones Realty Index expense
ration of 0.60%. And over the last 5 years, the Cohen and Steers REIT
has outperformed the Dow Jones REIT.
As I wrote in a posting on tax efficiency, I believe it can make sense
from a tax perspective to hold REIT ETFs within a tax deferred account. |
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