Vanguard vs. iShares: Which Real Estate ETF Suits Your Portfolio?
Written by Erin Kennedy for The Motley Fool -> iShares Select U.S. REIT ETF offers concentrated exposure to 30 U.S. holdings, while Vanguard Global ex-U.S. Real Estate ETF spans more than 700 international positions. Vanguard's fund features a lower expense ratio of 0.12% and a
iShares Select U.S. REIT ETF offers concentrated exposure to 30 U.S. holdings, while Vanguard Global ex-U.S. Real Estate ETF spans more than 700 international positions.
Vanguard's fund features a lower expense ratio of 0.12% and a higher trailing-12-month dividend yield.
iShares' ETF has provided higher one-year total returns but exhibits greater volatility.
Vanguard Global ex-U.S. Real Estate ETF (NASDAQ:VNQI) offers low-cost, broad international diversification, while iShares Select U.S. REIT ETF (NYSEMKT:ICF) provides concentrated exposure to dominant domestic real estate investment trusts (REITs).
Investing in real estate offers a path to diversification and income, but the geography of those assets matters. The iShares ETF focuses on the heavyweights of the American market, while the Vanguard fund looks abroad to more than 30 different countries. This analysis compares these two strategies to see how concentration, international exposure, and cost impact investors.
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund is significantly more affordable for long-term holders, sporting an expense ratio of 0.12% compared to the 0.32% charged by the iShares ETF. Income-focused investors may also find the international approach more appealing, as VNQI provides a higher payout with a dividend yield of 4.7%. This represents a yield gap of 2.3 percentage points over the iShares fund's 2.4% yield.
The iShares Select U.S. REIT ETF focuses on a narrow portfolio of 30 holdings, providing concentrated exposure to the largest and most dominant U.S. real estate investment trusts. Its largest positions include Prologis (NYSE:PLD) at 8.09%, Equinix (NASDAQ:EQIX) at 7.85%, and American Tower (NYSE:AMT) at 7.77%. Realty Income (NYSE:O) , a REIT popular among income investors for its monthly payouts, also earns a spot in the top 10.
