Real Estate ETFs: REET Has Broader Diversification, VNQ Boasts Higher Yield

Vanguard Real Estate ETF (VNQ 0.90%) and iShares Global REIT ETF (REET 0.59%) are both diversified real estate funds, but VNQ focuses solely on U.S. REITs with a higher yield and much larger assets under management, while REET offers more global diversification.

VNQ and REET each aim to give investors access to the real estate sector by holding portfolios of real estate investment trusts (REITs), but their strategies differ: VNQ tracks the U.S. market, while REET includes international REITs for broader diversification. This comparison examines cost, performance, risk, liquidity, and portfolio composition to highlight which factors may appeal to you depending on your investing priorities.

Snapshot (cost & size)

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.

Both funds are low-cost, with VNQ edging out REET by one basis point on expense ratio, making them equally affordable for long-term holding. VNQ’s dividend yield is marginally higher, which may appeal to income-focused investors, though the difference is slight.

Performance & risk comparison

What’s inside

REET holds 325 securities spanning global developed and emerging real estate markets, offering broader diversification than most U.S.-focused REIT funds. Its largest positions include Welltower Inc (WELL 0.11%), Prologis Reit Inc (PLD 1.44%), and Equinix Reit Inc (EQIX +0.18%), similar to VNQ but with allocations that reflect its international reach. The fund has nearly 12 years of track record, and its entire portfolio is in the real estate sector.

By contrast, VNQ concentrates on the U.S. market with 158 holdings, predominantly in real estate but with small tilts toward communication services and technology. Top names like Welltower Inc, Prologis Inc, and Equinix Inc overlap with REET, but VNQ’s focus is strictly domestic. Both funds avoid leverage and other structural quirks, making them straightforward real estate plays.

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What this means for investors

For many investors, real estate is a key part of any diversified investment portfolio. One way to achieve such exposure is through the ownership of a real estate exchanged-traded fund (ETF). Here’s how two such funds, Vanguard Real Estate ETF (VNQ) and iShares Global REIT ETF (REET), stack up in a head-to-head matchup.

First, let’s examine VNQ. As one of the most popular real estate ETFs, the fund offers several advantages. Size is one. Its AUM of nearly $70 billion is significantly more than REET’s AUM of less than $5 billion. That gives VNQ an advantage in liquidity. Another advantage for VNQ is its slightly lower expense ratio (0.13% vs. 0.14%). Lastly, VNQ boasts a marginally higher dividend yield of 3.7%, compared to 3.5% for REET.

REET, on the other hand, has its own set of advantages. For example, REET is more diversified, holding nearly twice as many stocks as VNQ. Many of those stocks are based overseas or in developing markets, which may add further diversification. In addition, REET boasts a higher one-year performance return of 6.5%, while VNQ’s one-year return is only 1.3%.

In summary, some investors may favor VNQ for its size, lower fees, and higher yield. Others may seek out REET for its greater diversification and superior recent returns.