REITs (Real Estate Investment Trust) are a type of security that is included in a few Vanguard funds. They offer a good way to diversify your profile with real estate, as you may already be aware.
One Vanguard fund that includes REITs is VTI. 2.98% of VTI’s holdings are REITs making it a good fund to invest in if you are looking to diversify your portfolio by adding some real estate investments.
There are also other Vanguard funds that include REITs, including a Vanguard ETF that includes only REITs. There are plenty of options when it comes to adding REITs to your portfolio. It just depends on how little or how much you wish to invest in real estate via the stock market.
How much of VTI is REITs?
Currently, REITs account for 2.98% of VTI’s total holdings. This is a good amount of REITs for an ETF that is compromised of a variety of holdings. Perhaps you want to invest in real estate via a fund, but do not wish to put all your eggs in one basket by investing in a fund consisting of mostly REITs? VTI is a good way to get your feet wet when it comes to diversifying with real estate investments.
What assets do REITs own?
REITs as a whole consist of more than $3.5 trillion in gross assets across the United States. REITs listed on the stock-exchange own around $2.5 trillion in assets. More than 5000,000 properties are owned by REITs. There is more than $1 trillion in equity market capitalization for the U.S. listed REITs.
REITs invest in a large variety of real estate investments. These can include apartment complexes and estates, commercial retail centres, warehouses, offices, medical facilities and hotels. REITs typically invest in one sector of the real estate market, even though they hold a range of properties in their portfolio.
How do REITs make money?
REITs do not increase in value in the same way that stocks and bonds do. Instead, REITs generate income by investing in properties on which rent is paid. The income created from leases and rent payments is paid out as dividends to the shareholders of the REIT.
Real estate is not directly owned by a REIT. Instead, a REIT generally finances real estate and benefits by receiving income from any interest on an investment.
Are REITs a good investment?
REITs are often considered an alternative investment. This is because they are bound to legal constraints that stocks are not when it comes to sources of revenue and dividends. This is something that should be taken into account when deciding whether a REIT is good for you.
REITs can sometimes be considered a risky investment since they can lose value when interest rates rise. However, they also can help you to diversify and you can often benefit from good returns. It should be noted that they perform differently from stocks and bonds, which is what makes them such a good option for diversification. They can also help offset the risk associated with investing in stocks and bonds.
Historically, REITs have provided positive returns while diversifying stocks and bonds, making them a decent investment. If you are unsure of whether to invest in a fund fully comprised of REITs or in REITs as a singular investment, VTI offers a good option for investing in security.
What other Vanguard funds include REITs?
Most other Vanguard funds, with the exception of a few funds which are specific to other industries, include some percentage of REITs. Vanguard has a REIT ETF, VNQ, which includes holdings in a variety of REITs.
Another fund, the VGSIX (Vanguard Real Estate Index Fund Investor Shares) also is a fund that invests in real estate, however, it is at the time of writing this closed to new investors. VGSIX is also available as an ETF with Vanguard Financials ETF (VFH).
Should I invest in VTI or another Vanguard fund that includes REITs?
VTI is a great way to get into investing in real estate. With VTI, you can profit from positive returns while diversifying your portfolio. Investing in VTI for the sole purpose of investing in real estate, however, may not be the best idea. This is only because of the small percentage of the fund that accounts for REITs.
If you wish to invest heavily in real estate, then VNQ may be your best bet when it comes to Vanguard funds. You could also look at other Vanguard funds, such as the Vanguard Index Fund Admiral Shares (VFAIX), which is comprised of mortgage and insurance-based REITs.
You should be aware that investing in REITs comes with some risk, as well as taxable income in the form of dividends. Since dividends are paid out by funds that are comprised solely of REITs, like VNQ, investing in VTI may be a more sound decision. This is especially true if you are worried about paying too much tax with a dividend-only producing fund. With VTI, you can invest in REITs without having to worry too much about the special tax complications that come along with the security.
VTI includes a decent percentage of REITs. These securities can be a good way to diversify your portfolio while investing in real estate. While you can invest in REITs directly, or choose a fund that invests solely in REITs, you can also choose to simply dabble in the REIT sector by investing in an ETF like VTI.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.